Dictionary
Debitoor's accounting dictionary
Due date

Due date - What is a due date?

In a business context, due date is the latest a payment can be made on an invoice or debt before it is considered overdue

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Due dates arise in a number of different contexts, even in the business world. But essentially, it boils down to when a payment must be made before it is considered late.

A due date is found on invoices, on loan payments, and on credit card payments, just to name a few. These dates indicate when the payment is expected and can result in a variety of different penalties in the case that the date passes without the specified payment being made.

When a due date has passed

Due dates might seem arbitrary but often there are clear guidelines about when a due date occurs and what happens after that date. Due dates can revert to a default standard depending on the situation, or can be specified by the seller, for example.

In any case, the due date makes it clear that payment is expected on or before that date. Once the date has passed, the payment is considered late and is subject to various consequences.

Including a due date on an invoice

When it comes to invoicing, it can be important to add a due date to encourage quick payment.

Because an invoice is a legal document included in a sale, adding the due date makes it clear for the customer. It helps avoid any ambiguity about when the payment is expected and any potential for denial of knowledge of that topic.

Late payment is one of the major issues that freelancers, sole traders, and small businesses face regularly, so even if your due date is the standard 30 days from the date of issue, it can still be a reminder for the customer.

Consequences of payment after the due date

The penalty for not making a payment on or before a specified due date is generally fee-based. For example, if you do not make a credit card payment on time, you’ll face a late fee that can be a percentage of the total owed.

Penalties for overdue invoices

As a small business, late payments on invoices can make a big difference in your cash flow, affecting your budget and even daily operations. Due dates are a big part of the process of getting paid on time.

Good online invoicing software will automatically set the due date to the 30 day default. However, this can be adjusted if your business works on a different payment schedule, or can even be set to different payment terms for specific customers.

When a customer does not make the payment in time, the first action to take is to send a reminder letter. With the right software, this can be as easy as a few clicks and they receive a reminder with a link to the original invoice.

A late fee can also be added to the invoice after the due date in order to encourage the payment to be made quickly. The late fee will then be added to the total of the original invoice, so the customer will be required to pay the former total as well as the late fee on top.