The Importance Of Your Payment Terms
Payment terms seem such a small thing in the scheme of your business, but the reality is it couldn’t be further from the truth. Your payment terms affect your cash flow and enable you to balance the books and meet your debts. You must set your customer terms with their specific needs in minds. Just because some businesses offer 60-day terms, doesn’t mean that you have to as well. Each business is different and each has their unique set of issues which affect cash flow on a daily, weekly or monthly basis. You control your cash flow Many small businesses underestimate the power they have on their cash flow. With more and more companies paying their bills later and later, the only option many small businesses have is offering 7 or 14-day payment terms. If you offer 30-days, then businesses can in all likelihood take advantage of your time-frame and extend it even further. Sometimes challenging the norms to benefit your business is the best thing to do. 30-day terms were more popular when organisations sent their invoices by mail; as times have changed, so can the obsolete business terms. 7 to 14-day terms are more popular than you...
Read MoreThe Domino Effect of Late Payments on Australian Businesses
The subject of late invoice payments has dominated the news heavily during the last 12 months. And with good reason! Many large businesses are taking advantage of smaller organisations and not paying within the terms of their agreement. This can be frustrating for businesses who are struggling with debt and limited cash flow. Poor cash flow can limit growth A slow cash flow can limit business growth causing major problems to both the business and the staff. Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman, has been extremely communicative on this subject and believes that something must be done to aid small businesses around Australia. The summary of findings from the Payment Times and Practices Inquiry states that 12% of firms lose more than 6 hours per week chasing late payments. The review also claims that based on an average 30-day payment term, one in two businesses report that 40% of their bills go beyond the invoice terms and 20% said they were paid beyond the two-month mark. Improving your cash flow As a small business owner, what can you do? Firstly, it is important that you negotiate the terms laid out by larger businesses. Endeavour to...
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