As an entrepreneur, understanding and adhering to the regulations surrounding payment terms is crucial for maintaining healthy business relationships and ensuring a steady cash flow.
Co-Founder of Xtroverso | Financial Strategist
Linda Pavan brings precision and expertise to Xtroverso, specializing in financial and tax solutions. Her dedication to empowering businesses ensures every decision is backed by clarity and confidence.
Legal Payment Terms for Businesses
For business-to-business transactions, the default legal payment term is 30 days unless otherwise agreed upon. You can agree on a longer payment term of up to 60 days, provided this is explicitly documented. Payment terms exceeding 60 days are only permissible if both parties can demonstrate that it does not cause any disadvantages.
Payment Terms for Large Companies and Government Agencies
When it comes to large companies paying SMEs, they are required to pay invoices from SMEs and freelancers within 30 days. This rule has been in effect since July 1, 2022, and cannot be extended. Government agencies must pay invoices within 30 days of receipt, although in exceptional cases, this period can be extended to a maximum of 60 days.
Obligations for Entrepreneurs
Entrepreneurs have several obligations to meet. Firstly, clear communication is essential. You must clearly state the agreed payment term on the invoice, in the contract, and/or in your general terms and conditions. Secondly, reasonableness should be considered when setting a payment term, taking into account what is deemed reasonable based on the product or service, delivery time, and invoice amount. Thirdly, any deviation from the standard 30-day term must be agreed upon in writing with your client, such as in a contract or your general terms and conditions. Lastly, if you previously used longer payment terms with large enterprises, you must adjust these to a maximum of 30 days since July 1, 2023.
Payment Terms for Consumers (B2C)
For consumers, there is no statutory payment term. As an entrepreneur, you may set a reasonable payment term for consumers, but the chosen payment term must be clearly communicated to the consumer, preferably in the contract or general terms and conditions.
By adhering to these regulations and obligations, you can ensure clear agreements and a healthy cash flow while complying with legal requirements. This proactive approach not only safeguards your business interests but also fosters trust and reliability with your clients and partners.