Many businesses operate on 30 days payment terms. This is the time frame for which customers or clients have to pay after an invoice has been set. Similar to your first credit card, you have 30 days to pay without any charges. For many business owners, this can either make or break your business. To make sure you are getting paid, learn about the importance of 30 day payment terms.
Invoicing In 30 Days Is A Reality
30 Day payment terms is a longer payment period. Certainly, business owners would like to get paid as soon as possible. Some owners are starkly against 30 day due dates. They claim to get electronic web banking deposits within a couple days after completing their work. However, that is not always a reality for customers or clients. To earn more business, you may have to give your customers a long time to pay.
Net 30 Vs 30 day
Next, you will want to know the difference between Net 30 and 30 days due. The major difference is in the statement date or the invoice date. For Net 30, you get paid 30 days from the order date while 30 Days Due allows you to pay after the invoice date. The invoice date is usually sent after the work is completed rather than started. To get paid faster, you can either use a Net 30 payment term or try to make sure that your invoice is sent quickly.
Net Or Days?
Not all business owners are in-the-know when it comes to popular business lingo. That is why there is a benefit to using 30 day requirements for your executive team. This way, those business owners that may not understand the meaning of Net 30 still understand what they are agreeing to. This helps to make sure that you get paid on time. It also helps to make sure that your clients know what to expect. Keep this in mind. Depending on who you do business with, it may be a factor to consider.
Ensure Payments Are Made On Time
To ensure that your customers pay on time, give them a schedule ahead of time. The schedule should explain upfront the payment terms, in this case, 30 days. Next, the amount should be clearly stated and detailed on the invoice. Finally, indicate important dates for on time or late payments. By mapping out the payment terms, amount and deadlines, they will be much more likely to pay on time.
Speed Up Payments by Charging Interest
In case your schedule isn’t working, you can always speed up payments by charging interest. There are several options to charge interest rates. Customers can pay after an invoice is past due. This would result in a higher invoice return. However, you can also run discounts to get them to pay quickly. If you find that you are making a good return on the interest, you could always consider a financial management course to specialize in these rates. Most customers would like to avoid interest payments so they will pay quickly. This serves as a nice back up plan for non-paying customers.
Incentivize Early Payments
Moreover, if you would like to have customers pay early on 30 day terms, then offer them a discount just as a retail industry business would. This discount is usually known as a 2% discount if the customer pays within 15 days. This is written as 2%/15 net 30. For the most savvy customers, you will almost always get paid before the 30 days are up. Lastly, if you really want to get paid even faster, you can offer larger discounts, incentivizing early payments.
Of course, 30 days payment terms are not the most attractive. As family business owners, we would all like to get paid quickly. Using this guide, you can deal with the reality of 30 days, use net 30 efficiently and get customers to pay on time. Be sure to use this post when you want to get paid on time and keep your business running strong.
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