Importance of Determining Payment Terms for Customer Invoice

What are Your Determining Payment Terms
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Importance of Determining Payment Terms for Customer Invoice

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Remember how you felt when you first broke the egg; managed to sell the product the first time and got your payment terms? Can not be described just how happy you were at that time? However, as a business owner, making a sale is nothing, it is a small thing in the midst of real business battles and struggles. In addition to making sales, you must also take steps to ensure that invoices or bills can be received on time.

Making provisions in payments determines the time period the customer must settle the outstanding balance, as well as the acceptable return method. In addition, these payment terms also include discounts that can be enjoyed by customers by paying off invoices before the given date. As a small business owner, you not only have to choose and set payment terms for customers but also must comply with the requirements given by vendors and suppliers.

The Importance of Payment Terms

Sales transactions will not have any meaning if your business has not gotten the money alias is still stuck in the customer. That’s why setting clear payment terms will help you ensure that the business will receive the money needed to meet your business expenses

In addition, this can also provide other benefits such as helping you facilitate everything from budgeting, payment of salaries, and others. Without a schedule and conditions, customers can choose to pay their invoices according to their own schedule, which of course can bring problems to your business, one of which is serious cash flow problems and can hamper the business operations themselves. In addition, businesses that do not set clear payment terms also do not have the resources to collect late fees.

It is important to remember that choosing and defining payment terms does not mean to make customers angry and disappointed. This actually offers additional options for customers to pay off their debts, such as discounts and lines of credit. In some cases, offers like this are far better and can even attract business from competitors.

Most Popular Types of Payment Terms

If you don’t have an idea or are still confused about determining the conditions for payment of your customer’s invoices, below this Journal will provide some of the most popular payment terms and are often displayed on business invoices.

1. Direct payment

This type of provision means the customer or buyer must immediately make a payment and will be due when the product is shipped. In the sense of “Cash Payments” (COD) or “Debt on Receipts.” If the buyer fails to make payment at that time, it means the seller has the right to take back the items.

This type of payment is very beneficial for business owners but will make customers uncomfortable. In some cases, customers can choose to use a different supplier that allows them to evaluate the products and services they receive before giving payment.

2. Net 30

This is the most common payment condition, i.e. net 30 days or n / 30. This means that the buyer must complete payment within 30 days from the date listed on the invoice. It is important to remember that 30 days does not mean 1 month, but rather a count of Haro. For example, when an invoice is written on January 1, then the customer is responsible for paying off payments on or before January 31.

In addition to net 30, you can also set other conditions, such as net 60, net 90, and so on. This can all be adjusted to your company’s current needs and the agreement between you and the customer.

3. 2/10 Net 30

This provision is almost the same as the above, in which the customer must make a maximum payment of 30 days after the invoice is received. However, this type of provision also offers a 2% discount to customers who pay their payments within 10 days. That way, customers with sufficient cash flow will prefer to pay a maximum of 10 days to get a discount and reduce costs. This of course also be good for your company or business right?


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