Understanding Payment Terms

When you have your own business, aside from providing your service to your clients, understanding when you will be paid is of utmost importance. In the early years of your business, cash flow can be difficult to manage and even more difficult to keep in the positive direction. If you can understand payment terms, you can better position yourself in the terms you offer your clients. 

Payment terms are the conditions under which the seller will complete the sale. The terms specify the period the buyer is allowed to pay the amount due. The following is a list of payment terms and how they are used in business:

These terms enable a quick turnaround of cash back to your business. The terms you should use when you are at the beginning of your business and are trying to build positive cash flow. 

N7- Net seven days, payment is due 7 days after invoice date

N10- Net ten days, payment is due 10 days after invoice date

PIA- Payment is due in advance, prior to the service being provided

Immediate- Payment is due immediately upon presentation of invoice

These terms can be offered once the business is stable in regards to its cash flow. Your business is now able to go longer between payments.

N30- Net thirty days, payment is due 30 days after invoice date

N45- Net forty-five days, payment is due 45 days after invoice date