Giving Credit And Agreeing Payment Terms

Agreeing payment terms or giving credit should NOT be seen as a given right for your clients, unless of course professionally you are a credit provider! This is critical to your success – as the alternative is that you will end up funding your clients businesses for them!

You should have the frame of mind that you are not a bank or charity, and that you also have bills to pay. Therefore your clients need to understand the importance of paying within your terms, and respecting you policies.

For example, even if you are short of cash - you cannot go into a Supermarket and buy your monthly shopping and then say you will come back when you can afford it, nor can you pay your staff, or your key suppliers, when it suits you. The same rules should apply in business.

Agreeing Payment Terms

Different sectors tend to have different payment terms to suit their industries, and the sorts of client that they work with

If you are giving credit then terms should be agreed on the outset, with all clients, but clients should “earn” the right to receiving credit terms, by providing you with a good payment history, and by showing financial credit worthiness.

You can have standard terms that you agree for all credit clients or vary your terms depending on the risk to your business, and the credit they are taking.

An acceptable default norm tends to be 30 days, but for the avoidance of any doubt you should always ensure that terms applied are agreed up-front with any new clients, and included on all documentation, including order confirmations and invoices.

Whatever terms you agree on with your clients – you and your clients should stick to them – for example, if agreeing on 30 days, then 30 days should mean 30 days!

Recommended Reading:

Solve Your Money Troubles: Debt, Credit & Bankruptcy by Robin Leonard J.D.

See Also:-

Invoicing Clients Effectively
Chasing For Payment
Effectively Managing Cashflow
Payment Terms Definitions
Business Networking Tips
Social Media Marketing

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