Remember how you felt when you first broke the egg; alias managed to sell the product the first time? Can not be described is not 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 by the business 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 have no ideas 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 the 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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4. Payment with Installment System
As you would expect, credit payment terms offer buyers credit for the products and services they buy. More popular among large companies, this type of payment provides a monthly invoice to each buyer, which is then paid by check or bank transfer. You can make agreements and agreements before deciding to pay by installment system. For example, by providing interest which is certainly smaller than the bank.
5. Send an Invoice
As a small business owner, you might send several invoices every month. However, issuing invoices is only the initial challenge. Next, you must take steps to ensure that invoices will be paid on time by customers. To increase opportunities for being paid on time, be sure to discuss payment terms before distributing products or services to customers. For example, giving information to customers, whether cash payments are due at the time of delivery and whether to use a credit card to pay off their balance. This is a good idea, given the industry standards when choosing payment types.
To simplify sending invoices, you can also use Journal accounting software that can help you create and send invoices or invoices at the same time automatically, anytime and anywhere. Where, this invoice will also be automatically recorded in the business books. Not only that, Journals can also help you receive payments faster through the Pay Journal feature .
Most small business owners will deal with outgoing and incoming invoices on a regular basis. If you receive invoices from vendors, it’s important to pay attention to payment options so that you don’t risk losing them. While some supplier invoices set rigid payment guidelines such as asking for cash at the time of delivery, another option is to get a discount by paying early.
While paying early can save you money in the long run, businesses must also take steps to ensure that it won’t make you cash-strapped. If your customers pay using Net-30 or Net-60 requirements, you might find yourself lacking the cash needed to settle vendor debt. If your vendor offers several payment options, you might want to remember cash flow when choosing your preferences.
Communicate Payment Terms to Customers Clearly
It’s no secret that small business owners have to compete with busy schedules. Although revamping the invoice system may seem like a burden, the reality is that streamlining invoice techniques can save you time in the long run.
Prepare a clear and specific invoice system, also communicate the payment terms to the customer as a whole. For example, say your business only accepts cash. In addition, small businesses must try to send invoices right away when a new purchase occurs and has just been done.
Those are some things related to payment terms and conditions that you should know well. Understanding this makes it easier for you to do billing and make provisions in every business transaction.