Net Terms
Do you offer your customers net terms on their orders? What are net terms?
It simply means you are extending credit to your customer, and expect them to pay the net for the full amount of the invoice within 30 days. Think of it as a short-term loan. Some businesses are offering net 60 or even 90!
What are the benefits of offering net 30 terms?
It gives you the opportunity to expand your customer base by allowing you to take on more clients as well as service businesses that might not have a lot of cash, such as small or new businesses. Some makers will offer net terms to customers that have bought from them many times as a reward.
Buyers like net 30 because of course it allows them extra time to pay their invoices and manage their cash flow. Many new businesses use it as a way to build their business credit,
Should you offer net terms?
Deciding whether to offer terms has to do with how much cash flow you have especially if they pay late. It may be very hard to wait 30 days to get paid.
When you offer net terms you may be tasked with more work such as following up with a late-paying customer or worse handing collections. This is time away from your studio and many times leads to unanswered phone calls and emails.
If you decide to offer net terms make sure all the terms are clear.
Be clear when the 30 days start. Is it when the invoice is received?
Do the 30 days start when the product is received? Make sure you and the customer are in agreement regarding your expectation.
Keep in mind that net terms are usually offered interest-free.
You also have the choice to offer incentives for early payment. This can gain customer loyalty as well as the opportunity to receive full payment sooner.
If 30 days seems like a long time to be paid you could always offer net 10 or net 15. Every business is different so you find what works best for your business and your customers.
We suggest you talk to other makers and find out how they handle invoices and get paid. If they are offering net terms, find out if it works for them and what steps they take to ensure it is a positive experience for both parties. The more you understand about it the more successful it will be for you and your business. Do your research!
Getting paid when the order is complete and ready to ship is good for your cash flow and alleviates a lot of stress. There is no chasing down a customer nor do you have to wait for the money.
