Note that the end of the month is likely less than 30 days away, so the payment due date defers to the following month. So, if a customer received your invoice in July, they would have until August 31st to pay. This is why it’s so important to analyze which payment net 30 payment terms terms are right for your business. You may already have accounts that give you payment terms, even if you don’t think of them that way. For example, if you have a cell phone bill, you probably pay for the service and data you’ve used in the previous month.
Customers who receive net 30 terms and pay late abuse your generosity. If you wish to continue working with slow paying customers, implement a policy of requiring cash upon delivery. At a later date, you could choose to extend to credit again—or not.
Business Credit Cards that Report to TransUnion
While you may not like the idea of becoming a lender, the practice is a valuable way to establish credibility because extending credit shows your business has healthy cash flow. A typical situation small businesses find themselves in is having a client that wants a net 30 day contract. Meanwhile, the company might have outgoings that it needs that money to cover, and trying to accommodate the customer’s terms could create cash flow problems. There is one solution to that type of scenario, and it’s called invoice factoring.
If you send invoices regularly, it can be hard to quickly grasp when cash will start flowing your way and what those amounts will be. Reporting tools found in many invoicing and accounting services consolidate the various balances and due dates into a usable format. Instead of “net 30,” you may want to write “payment is due in 30 days” in your payment terms.