Your Guide to Establishing Payment Terms for Better Cashflow

When it comes to supplying customers, you know that it is important to do your part in establishing their credibility and their reliability. Your customers need to have a good credit and payment history, and one way of determining this is by doing your own reference check. Additionally, you have to find out all you can about the company, what their exact business name is, what kind of business they are (whether they are a limited company, a partnership, or sole proprietorship), as well as all their contact information, including the owners’ names, their address, and so on.

But aside from doing all of this, there is another way in which you can make sure that you are paid on time without any problems – and this is through establishing clear payment terms. If your customer understands the payment terms of their agreement with you, this will result in better cashflow management, as a lot of cashflow issues result from late payments, or, worse, non-payment.

Tips for establishing clear and concise payment terms with your customers

Make everything clear – in writing – beforehand

Before you even do the first business transaction with a customer, you have to set and agree to clear terms of payment with them. This is better done in writing as well, with the necessary signatures to avoid blame in case things go wrong. You should also include specific terms and conditions for late payments and the like.

Check any documents sent to you by the customer for any changes in payment terms

If your customer sends you documents to sign and agree to as well, you have to check these carefully. There might be changes included in the terms of payment that you are not aware of and are mistakenly agreeing to when you sign without checking closely. If your customer has different payment terms in their agreement with you, then their payment terms will have more weight if there is a problem.

Don’t be afraid to raise another invoice for late payments

Once you have begun doing business with a customer and have found that they are prone to late payments, what you can do is send them a warning or notice the first time they give you a late payment. If they still do not comply, do not be afraid to send them another invoice for additional charges in late payments or interest. This will let them know that you mean what you say and will not take any other late payments lightly. If they get offended by this, then you may be better off with other customers who pay on time.

What to do if your customer says they will no longer pay you on the scheduled payment terms

It sometimes happens that the customer will inform you that they can no longer send you the payment on the date or schedule you have specified. If this happens, you have to carefully weigh the importance of their business with you. How will this affect your company? Also, ask yourself if you can afford to lose their business in the future. If you think you can, then you do not have to agree, especially if it affects your cashflow.

The problem with any business cashflow is that it depends greatly on when customers pay. But if you would like to be less dependent on the schedule of payment from your customers, you can take advantage of cashflow solutions from specialists like Ultimatefinance.co.uk, which allows you to receive a cash advance from your unpaid invoices, therefore eliminating any cashflow issues once and for all.

Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

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