Our partners at Draycir, have provided us with a great guide on how to manage a company’s cash flow. The following article is part 2 of 9 of the Managing Cash Flow Guides series. If you missed part 1, you can read it here!
If payment fails to arrive for goods or services you have provided, your cash flow can be under real pressure. Cash flow keeps business in business and – if you think you are being paid on one date and your customer has a different date in mind – you could be in trouble! Making assumptions is dangerous and formally agreeing payment terms in advance is vital.
5 Tips for Dictating Payment Terms:
- Set out and agree payment terms in advance and in writing. It’s better to know what to expect than to leave things to chance and wonder why the money hasn’t arrived later.
- Watch out for any wording in documents from your customer that changes the agreed payment terms. If you accept their order, you might also be accepting their changed payment terms. If their documents contain terms that are different to yours and you fail to challenge them, their terms will take precedence.
- Whenever you write about payment terms, and on your invoices, include the words: “We will exercise our statutory right to claim interest and compensation for debt recovery costs under the Late Payment legislation if we are not paid according to our agreed credit terms.” Even if you don’t intend to do so, it can be a useful deterrent against late payment.”
- Raising a further invoice for interest and late payment charges is an excellent way of gaining your customer’s attention and raising the profile of your outstanding invoices.
- If your customer unilaterally tells you they are going to take longer to pay in future, you will have to decide how important their orders are to your business. If they’re claiming the extended payment terms for invoices already raised, you should demand payment under the previously agreed terms for services or goods previously supplied.
Want to learn more about credit management? Register now for TGO’s Collections Management webinar !
