Payment requests - when to send one and what it is not
A payment request is the easiest document to get wrong, because it looks like an invoice and behaves like a reminder. It asks for money, it carries an amount, and it reaches the customer the same way. What it does not do is enter your books, create a VAT liability, or give the customer anything to deduct.
When it is the right tool
Three situations recur. An advance before work starts, when there is nothing to bill for yet. A recurring fixed payment, such as a monthly retainer, where it is easier to send a request and invoice when the money arrives. And an open balance after a partial payment, where there is no new sale and therefore nothing to raise a second invoice against.
- Asks for money, records no sale
- Not counted in turnover
- Suits advances and recurring payments
- Does not start the payment-terms clock
- Records an agreed sale
- Grants no input-VAT deduction
- Suits cash-basis reporting
- Converts into a tax invoice on payment
The tax invoice is the third, and the only one of the three that reaches the periodic return and lets the customer reclaim VAT. The full comparison is in the guide comparing all three.
The invoice is what counts the days
The Payment Terms Law sets maximum payment periods and counts them from delivery of the invoice. A payment request does not start that count. A business that sends payment requests and waits, then finds the invoice went out a month later, delayed its own clock by a month.
The practical conclusion: when the goal is getting paid on time and there is a sale you can bill for, the invoice wins. Keep payment requests for the cases where there is nothing to bill yet.
- The amount, and on the same line whether it includes VAT
- A due date, not "at your earliest convenience"
- Full account details: bank, branch, account number and beneficiary name
- What the payment covers, in one line the customer will recognise
- A reference to the order or quote it follows
- What will be issued once payment arrives, so the customer knows an invoice is coming
VAT does not move with the document you sent
The tax point is set in law by the type of sale and the reporting basis, not by the heading on your document. A business on a cash basis, which covers most service providers and small businesses, is liable when the payment is received. A business on an accrual basis is liable at the time of the sale, whether or not an invoice went out.
So a payment request does not defer VAT. It only defers issuing the document, and that is worth confirming with your accountant before building cash flow around it.
How this works in Slate
The payment request is built like any other document, with your account details printed at the bottom. When the money arrives, it converts into a tax invoice or a tax invoice receipt with nothing retyped. You can see a sample payment request and check what it actually prints.
Common questions
What is a payment request?
A document asking the customer to transfer an amount, with the account details to pay into. It has no invoice standing, is not reported for VAT, and gives the customer nothing to deduct.
How does it differ from a transaction invoice?
A transaction invoice records an agreed sale and requests payment on it. A payment request asks for money that is not necessarily tied to a new sale: an advance, a recurring payment, or a balance left open.
Can I send a payment request instead of an invoice?
You can ask for money with it, but it cannot replace the invoice. A VAT-registered customer needs a tax invoice to deduct the VAT, so the invoice has to go out either way.
Does a payment request trigger VAT?
Not by itself. The tax point is set by the type of sale and your reporting basis, not by the document you sent. On a cash basis the liability arises when the money arrives.
When does the payment clock start?
The Payment Terms Law counts from delivery of the invoice, not from a payment request. To start the clock you have to issue an invoice.
What makes a payment request actually get paid?
An amount, a due date, full account details, and one line saying what it covers. Missing account details or a missing due date is the most common reason the document is set aside.