How to reduce risk when your customers ask for payment terms?

When you start your own business, it’s natural that you will ask your customers to pay upfront or on completion of a service. But as you develop relationships with your customers, they may ask for payment terms, such as 30 days from the end of the invoice month. How do you do this while minimising risk?

• First of all, get a credit application form filled out. Ensure it has all their information and a signature of the business owner. Make sure the terms of payment are included.

• Second, check their credit using credit references that they supply, and if you can, use a paid service like Vera or Creditor Watch.

• Third, set a credit limit and do not allow your customer to exceed it.

• Lastly, send your customer reminders shortly before payment is due. If you have multiple invoices for the same customer, it’s a good idea to send statements each month, showing their total balance. Promptly place any customer on credit hold if they are overdue.

This is just a brief overview, for more advice on how to do this, please get in touch, and follow us for more tips!

Disclaimer

This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided having regard to your objectives, financial situation and needs.