Deciding your payment terms
Few things are more important to a business than their payment terms. It’s essentially the circumstances under which you get paid. Without them, your company’s cash flow will come to a grinding halt. Ultimately, with flimsy and poor payment terms, businesses effectively crumble.
However, because there are so many kinds of payment terms out there, a big question remains. Just how you can decide what payment terms are best for your business? What factors can help you decide on which route to go down?
Forms of Payment
Not every business can accept every kind of payment. Whether it’s limited technologies or it’s just down to your general preferences. You have every right to accept some forms of pay and reject others. Still, it’s also true that if you open the door a bit wider here and accept more diverse forms of payment, you may just find yourself working with more people and boosting the company’s prospects.
For example, you could accept credit card, debit, cash or PayPal payments, or utilise invoice financing through invoice discounting services if you’re looking for a cash flow solution. What you decide may depend on the size of your business, and if you have digital storage and fintech at your disposal to take on the more advanced forms of payment. If not, the standard cash and card solutions are the more appropriate option for you to use for now.
Draft and Distribute a Document
No matter who you’re working with, it’s important that you’re all working under the same understanding. When different assumptions are at large around pay, that’s when the serious arguments and frictions start to form in a firm. Instead of allowing this to happen, as an accountable business, it’s your responsibility to set the parameters of any engagement; and that includes payment terms.
Firstly, draft and distribute a document that outlines your payment terms in very specific and concise language. Detail what your rates are, when payment is due, accepted currencies and the penalties that occur for late payments. Hand copies over to all the appropriate parties involved in the exchange, and that way, everyone is always on the same wavelength, with no nasty surprises cropping up in the near or far off future.
Late payments can have dire consequences for a business. In many cases, they stoke a great deal of fear in entrepreneurs and even affect the economy at large when the problem is widespread. Consequently, it’s important that you do everything you can to ward off this possibility and get paid as soon as you can.
Well, invoicing is the solution here. It’s always best to get paid as soon as possible, so always invoice right away if you can. This puts everything in place for the payment to go through and cuts out time spent negotiating or arguing. All the payment terms are outlined, so long as you make sure dates, figures and names are correct on the invoice, your compensation will always go smoothly.