Why Payment Terms are Important in

your Business
Whether you are running a small business or a big corporate, you have to manage payment and bills.
Every business owner defines some terms for the payment. Payment terms could include anything
payment related like timeframe for the payment, installments, due date or discounts. It depends on you
what options or ease you give to your customers to pay you. But if your payment terms are not good
enough, it could bring harm to your business.

Payment terms are important because it deals with the cash flow of your business. These terms
should be smart enough to maintain the positive cash flow in your business and efficient enough to
provide ease and facility to your customer as well. Having bad terms will lead your business to
negative cash flow and it would be very difficult to turn the cash flow back in your favor.

What are payment terms

Payment terms are the rules, conditions and timeframe for your customer or client to pay you for your
service or product.

Who define payment terms

Payment terms are defined usually by the business owner. As the owner of the business, you would
have the best understanding about your business.

You can also take some help from some finance expert. However, with the experience in your business
you will be the only expert to understand how your payment terms should be defined.

What should payment terms include

It depends on you and your business what to include in the payment terms you define for your business.
However, a simple example is given here about the points that should be included in your payment
terms. Your payment terms may include the following,

 Payment Due Date

 Payment Options
o Cash
o Paypal
o Cheque
o Credit/Debit Card
 Preferred currency
o If you have international clients
  Early payment discounts
o Businessmen loves it
 Late payment penalties

Bring some automation

Managing the forms and data yourself is for sure a time taking busyness. Moreover checking for the
errors and making corrections in figures or customer’s data will surely give you a tough time. The best
thing to do in such a situation is to automate the invoice process.

There are plenty of software available today that can be handy in automating your invoice process. You
can easily one for free or paid if you want that will automate the invoice process.

The best thing is that you won’t have to do the calculations and mathematics for yourself. The software
will do that for you. You can even have a smart phone application. The point is that you should
automate the invoice process so that you could easily manage your payments and pay more attention
towards the progress of your business.

Keep record
It is said that the one who has data today is the king of the market. You should keep record of your
payments and not only that but also the other factors of your business as well.

Keeping the records will help you to manage your cash flow. It will also help you to prioritize your
customers. Moreover, analyzing the records can also bring you future benefits in your business.

Using the record you can analyze the customer’s behavior, business cash flow and average sales etc.
This will help you in taking good decisions in scaling up your business.

Conclusion
Payment terms are very important in your business whether your business is small or a big corporate.
These terms are responsible for the cash flow in your business.

Therefore, define smart payment terms to maintain the positive cash flow and make progress in your
business. Moreover, automating the process with easy to use applications and software will help you a
lot in saving time and managing your payments.