The main risk when you own a business is to have to deal with clients who don’t pay your invoices on time. If it’s only one or two exceptions, it’s something that you can handle pretty well while keeping a positive cash flow. But if you’re a single independent professional, you can’t deal with one client not paying on time, because you’ve got no other income sources to compensate. Unfortunately, whether you like it or not, some clients – especially big companies – have a tendency to apply their own terms, and consequently, they may pay you when it suits them… and not when it says on the invoice! So how can you deal with these clients, and more importantly, should you be considering immediate payment for all your work?
Payment is immediate in eCommerce
If you’re lucky enough to work in online retail, unpaid invoices are nothing you need to worry about. In fact, your responsibility is to give your clients the best payment system possible, so that they can pay easily for their purchase at the time of the transaction. You’ll find a detailed article on http://smallbiztricks.com that presents the various payment methods that are available to eCommerce businesses: payment gateway, integrated system, and online wallets. With all these solutions, you will need to provide your clients with a secured payment area – the famous https:// and the icon of the padlock – as there’s a risk for personal data to be hacked or stolen.
For invoice-based businesses: It varies
If your business works with invoices, then you might find yourself struggling to decide over the right invoicing terms for the purchase. The three most common terms are the net-30, net-60 and net-90 terms, which means that your customers have to pay the net amount 30,60 or 90 days after receiving the invoice. While the most common type of term invoices is 30-days, you can find that long-term projects are often divided into several invoices – one each month for example. You can also design specific terms to meet your customer’s’ requirements, such as a B2B customer purchasing your services or product before budgeting for the amount.
Potential risks of long-term invoicing
The main problem with long-term invoices is that your customers may not pay them on time. Consequently, you might be struggling with momentarily negative cash flows and might even need to get in touch with https://smallbusinessloans.co to arrange for an invoice financing option. This can allow you to turn invoice payment into cash money so that you can continue your business activities until the invoice is paid in full.
Advantages of long-term invoicing
Offering your clients to pay with a delay is a great way of appealing to small businesses that might need your services but are lacking the cash ability. As a rule of the thumb, small businesses tend to prefer 30 to 60 days invoices, as this allows them to maximize their purchase through their activity and pay then for the products or services.
Depending on your business activities and the type of clients you work with, you will find a variety of invoicing systems, from immediate invoices to net-90 terms. While there is no better or worst case scenario, it’s important to plan your budget around your invoicing period, so that you don’t accumulate debts unnecessarily.
Featured image: Pixabay