Popular accounting software defines invoice payment terms as, “an agreement that sets your expectations for payment, including when the client needs to pay you and the penalties for missing a payment”.
Having won the bid and bust a gut to get the job done well and on time, you’d think that the work is done, right? Yet getting paid is too often a full-time job all of its own. Let’s look at how your invoice payment terms can assist in boosting your cash flow.
Invoicing Payment Terms
Just as every industry has its own jargon and abbreviations, there are common invoice payment terms you should know:
Ways To Get Paid On Time
Go over your contract with the client carefully and make sure that they understand how, when, and by what method they must make payment. If there are any questions or concerns, clear them up before they sign on the dotted line. Being transparent is essential if you want your client to understand your billing process.
Discounts
The first rule of business is to avoid early payment discounts. It’s tempting, especially in the beginning when you’re just getting off the ground, but trust us: they can be costly as they add up.
Cost Monitoring and Prompt Invoicing
Project costs can be difficult to predict, so it’s important that you have a good understanding of your client’s budget and expectations. By closely monitoring your costs at every stage of a project, you will be aware of the state of your cash flow, and you’ll be ready to invoice immediately upon completion.
Pre-submission
The best way to get paid timeously is to submit the invoice before work is done. The earlier you can send an invoice, the less time is wasted waiting for long accounting processes.
Invoice Factoring
Invoice factoring is a financing option that allows you to get paid before your customer pays you.
It’s a type of asset-based lending, which means that invoice factoring companies will buy your accounts receivable (i.e., outstanding invoices) at a discount, and then they’ll collect the full amount from your customers and pay you back minus their fee. This improves your business’s cash flow without having to wait for your clients’ payments or risk not getting paid at all.
This dynamic allows businesses with small amounts of equity capital but high levels of outstanding invoices—such as service based businesses or companies involved in manufacturing—to expand without having access to traditional lines of credit from banks or other financial institutions.
If accounts receivable financing or invoice factoring is an option you are considering, include it in your invoice payment terms.
Invoicing is one of the most important parts of running a business. Even if you already have customers, getting paid on time is still crucial. The good news is that there are ways to ensure that your invoices get paid on time so that you can continue growing your company!
For more information on invoice factoring and how it can be built into your invoice payment terms, contact Kore Capital Solutions today.