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What Are The Ideal and Most Suited Invoice Payment Terms for Your Small Business?
If you wish to receive payments as per your client’s convenience but you want to set up a term or terms that are suitable for yourself too – then you need to look into a few things before coming to conclusions just so you make the right decision and fulfill your client’s needs too. Clients stick to a company and certain people if they get what they are looking for – their unsatisfaction may lead you down to a path you do not want to go to. Therefore, you need to establish and maintain positive relations with your clients as an entrepreneur.
In such sensitive terms, your industry plays an important role but so does your client’s history. These may be called “Key components” when choosing the right invoice terms.
Typical Invoicing Strategies
Anyone running a company would want to get paid as soon as possible but again, you need to prioritize customer’s convenience too. The standard invoicing strategy used by most companies is known as NET 30 which means that customer has to pay you within 30 days once the invoice has been issued. If you are running a small business, you can lean towards NET 7, NET 15, or perhaps C.O.D (Cash on delivery). This may work in your business’s favor but customers may not be at ease.
If customers complain about your invoicing terms then it could be mainly because the rest of your industry is following a different pattern that does not match with your business. A simple solution to this is “gathering information” from different, legit sources related to your industry then you can see the flaws in your terms and may act to change them.
The three categories small businesses fall into when it comes to setting payment terms are:
Terms are always Net 30: For instance, almost all manufacturers of tangible consumer goods offer NET 30 terms.
Terms range from Net 30 to Net 60: For instance, in the construction and fashion industries, NET 30 and NET 60 are the most common.
Terms vary widely: Freelancers are a good example of this as some may require payment upfront and some may give you as much as NET 60 to issue payment.
There are some other things that you may want to keep in mind when choosing your Invoice Payment Terms:
Size of the Invoice
Client’s history
Late Fees & Interest
You can also provide Early Payment Discounts to clients which could make them pay earlier than they are supposed to.