Invoice Handling and Payment Terms: Best Practice
Effective invoice handling is the foundation of healthy liquidity. Learn how to draft payment terms, issue correct invoices and follow up systematically on arrears in Denmark.
Why invoice handling is crucial
For many small and medium-sized businesses, outstanding invoices are the biggest threat to liquidity. Every day an invoice goes unpaid, you are financing your customer. Good invoice handling is about making it easy for the customer to pay on time, and about having a solid basis if they do not.
Danish rules on payment terms and interest
When is an invoice due? If you have agreed or stated a due date, that date applies. If no due date has been set, interest only runs once 30 days have passed from your request for payment (section 3 of the Danish Interest Act, renteloven). Between businesses, payment terms of more than 30 days require your express acceptance as the creditor (section 3 a).
Late-payment interest: the late-payment rate is the reference rate (Danmarks Nationalbank's lending rate on 1 January and 1 July) plus 8 percentage points per year (section 5).
Fees: you can charge a reminder fee of at most DKK 100 per reminder, for no more than 3 reminders, and only if there are at least 10 days between them (section 9 b). If the customer is a business, you can also claim fixed compensation of DKK 310 for late payment (section 9 a).
Draft your payment terms
Clear payment terms prevent misunderstandings and give you a solid basis if the case ends up with a debt collection agency. Consider stating:
- Payment deadline: write the number of days or a specific date, e.g. "net 14 days" or "due 30 April"
- Currency and payment details: Danish bank registration and account number, and IBAN/BIC for foreign customers
- Consequences of late payment: that late-payment interest is charged under the Interest Act and reminder fees are charged
- Any special terms, e.g. retention of title or prepayment
Avoid vague wording such as "payable on receipt". A specific due date means interest runs from that day.
Issue correct invoices
A correct invoice is your most important document. Danish VAT rules set requirements for the content of a standard invoice, including:
- Date of issue and a sequential invoice number
- Your CVR or SE number (Danish business/VAT registration number)
- Name and address of both seller and buyer
- Quantity and type of goods, or extent and type of services, and the date of supply
- Price excl. VAT, VAT rate and VAT amount
The buyer's VAT number must appear in certain situations, for example on sales to businesses in other EU countries or where the buyer accounts for the VAT (reverse charge). For smaller sales of up to DKK 3,000 incl. VAT, a simplified invoice can be used in many cases. Check the exact requirements with the Danish Tax Agency (Skattestyrelsen) if in doubt.
If you sell to the public sector, the invoice must be sent electronically via NemHandel.
Expert tip: Automate invoicing and reminders
Accounting programs such as e-conomic, Dinero and Billy can set due dates, send automatic reminders and calculate interest and fees. Set up your reminders to comply with the Interest Act (at most DKK 100 per reminder, no more than 3 reminders and at least 10 days apart) so you avoid fees the customer does not have to pay.
Systematic follow-up
Do not wait for the customer to pay of their own accord. A fixed procedure could look like this:
1. A few days after the due date: a friendly reminder. Check whether there is a practical reason for the delay, or whether the customer disagrees with the invoice.
2. First reminder: with a reminder fee and a new payment deadline.
3. Second reminder / debt collection notice: at least 10 days after the previous one. The debt collection notice must contain all the necessary information about the claim, a deadline of at least 10 days from sending and a warning that the case will be sent to debt collection with further costs (section 10 of the Debt Collection Act).
4. Debt collection: if the deadline expires without payment, the case can be handed to a debt collection agency or a lawyer.
Expert tip: Communicate in writing
Always confirm agreements made by phone, for example an instalment plan, by email straight after the call. Written documentation is decisive if the customer later disputes the agreement, or if the case ends up with debt collection or in court.
When payment does not arrive: debt collection
Before you send a case to debt collection, make sure that:
- the invoice was correctly issued and delivery is documented
- the customer has received a correct debt collection notice with a deadline of at least 10 days
- there is no unresolved disagreement about the delivery
Debt collection costs can then in principle be recovered from the debtor, within the caps set by the executive order on out-of-court collection costs.
Your action plan
1. Review your standard payment terms so they are clear and in writing.
2. Set up automatic reminders that comply with the Interest Act's fee rules.
3. Document all contact about outstanding invoices.
4. Set a clear threshold for when a case is sent to debt collection, and stick to it.
5. Check your invoice templates against the VAT requirements.
Through InkassoHurtig you can get no-obligation quotes from police-authorised debt collection agencies and lawyers if you need help. This content is general information and not legal advice.