It's not uncommon for two companies to owe money to one another. This also means that if your client is unable to render payment, you have the right to repossess the goods or the intellectual property that you've delivered. These two invoice payment terms are used when you want immediate payment. Cash on delivery (COD) or payable upon receipt When your clients receive goods or services on a recurring basis, you can set payment terms such that the client must pay their invoice in full before you provide another delivery. This method is used for recurring invoices. Typically, CBS is used when referring to shipping physical goods, while CIA tends to be reserved for those who perform a particular service, such as web designers or graphic artists. Your customers must submit full payment prior to shipping their products or before performing a particular service. Cash before shipment (CBS) or cash in advance (CIA)īasically, these two payment terms allow you to ask for a down payment. "Cash account" means that your clients can't use another payment method, such as credit, nor can your clients expect any credit to be issued. This payment term denotes an invoice that can only be paid in cash. These invoice payment terms can help you define the date that you expect payment and communicate your preferred payment method. What payment terms are right for your business? You might consider this list of the most common payment terms in use by small businesses today. Communicating clear invoice payment terms to your clients can therefore be vital for financial forecasting and long-range planning. It can also help you predict your company's revenue. Having an organized method for collecting and managing invoice payments can do more than just protect your cash flow. Overdue invoices can create cash flow problems, which prevent you from having the funds to pay your bills, pay your employees, or invest in the future of your company. Do I need to use payment terms?Īs a business owner, it's wise to include at least some basic invoice terms to protect your company's cash flow. In other words, your payment terms tell the customer three things: When to pay you, how to pay you, and what happens if they miss the deadline.
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