Payment terms with customers

A key thing to remember with payment terms to your customers is that don’t ask less than what you yourself are given. If your suppliers ask for 10 days to pay up, so should you. Or at least consider it before opting for longer payment terms with your customers. 

Yes, it’s healthier to keep customer payment deadlines shorter than what you’re given from your suppliers, that’s rule number one. However, it’s important to consider the longevity of the materials your supplier provided. If the purchase was say for 100 batches and you use just 10 monthly, it’s safe to say that the payment term doesn’t necessarily need to be this short for your customers as well.

When agreeing on payment terms with your customers consider your monthly cash flows based on the assumption that you’d want to keep all payment deadlines. It should also be noted that in some months it may be possible that you’ll require more cash since you’re making purchases in bulk for several months. That’s something to also factor in when preparing to agree on payment terms.

Another thing, always start with a lesser period and negotiate your way up if there’s need. There’s no sense in giving up before the fight has even started.