Understanding Credit Payment Terms Your Business May Offer

You can keep your company’s cash flow levels stable by offering the right combination of credit payment terms. When you extend credit options to your clientele, you build lasting financial relationships and open the doors for revolving transactions. You must appropriately select the right terms for your company, however, to prevent bad debt accumulation from hurting your bottom line. Here are the terms you may choose for your business operations.

If your clients routinely purchase large product lots, or extensive service packages, you may offer revolving credit lines. Your clients simply rack up credit for the month, and then pay it off in a lump sum to start over at the beginning of the next invoice period. You will need to submit pay in full invoices to collect on the owed debts by the given due dates.

Installments

Clients in need of staggered, structured payments for their orders may prefer an installment option. With this credit payment term, you provide the order or service requested by the MO client, and then collect payment in small chunks across the agreed upon time frame. You may receive your full payment in installments by the end of the invoice date or across several if you extend the credit line out for your client.

Payoff Discounts

With either option, you can encourage your clients to pay off their credit accounts with you early by offering payoff discounts. You may discount the current or future invoice at a certain percentage as an incentive for your clients to pay off their balance in full right away. With this payment option, your clients receive financial incentive and you reduce your chance of building up a stack of doubtful or bad debt accounts.

You can work with your accounting expert to determine the best credit payment terms for your business. For professional assistance with your accounting needs, contact the team at accountRely in St. Louis, Missouri.

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