Using Accounts Receivable Selling Terms to Grow Your Business
Table of contents
- Using Accounts Receivable Selling Terms to Grow Your Business
- Offering Selling Terms to Customers with Bad Debt Protection
- A Guide to Selling on Terms
- Bankers Factoring allows businesses to sell on credit through our non-recourse factoring program:
- What are Net 30, 60, 90, and day terms?
- What does selling on terms mean?
- What is the purpose of invoice credit terms?
- How are selling credit terms written?
- Examples of seller credit terms
Offering Selling Terms to Customers with Bad Debt Protection
A Guide to Selling on Terms
Selling on terms is when a business extends credit payments over time to its business (B2B) or government (B2G) customers. Credit terms allow customers to avoid paying cash upfront to their vendor. Typical payment accounts receivable terms are Net 30, Net 60, and Net 90 days.
Payment terms help sellers gain a competitive advantage with the capability to acquire commercial customers. Vendor agreements and official order documents communicate the terms and conditions for purchase orders and sales.
Offering your customers’ invoice credit terms can hurt your cash flow if you do not have sufficient cash reserves. Extending credit with the best factoring finance company helps eliminate the risks of selling on terms.
Bankers Factoring allows businesses to sell on credit through our non-recourse factoring program:
- Bad debt protection from customer payment default
- Outsourced back-office support for receivables and credit departments
- Receive cash advances up to 93% of your total accounts receivable (A/R) value
- Consistent cash flow allows sellers to extend Net 30, 60, or 90-day terms.
- Extend credit terms with Factor Finance
If your business needs help financing customer credit and obtaining reliable receivable financing, complete our online funding application.
What are Net 30, 60, 90, and day terms?
Net payment terms, also called credit terms or customer terms, are a way to offer your customer a payment plan. Payment terms of NET 30, 60, and 90-days enable businesses not to pay cash on demand for goods and services.
Credit terms are established in vendor agreements at the time of purchase. A buyer and seller agreement states when payment must be made for a product bought on credit. Extended credit terms help sellers acquire sales and help the customer manage its cash flow.
Keep reading the full article, Offer Credit Terms through Invoice Financing.
What does selling on terms mean?
Selling on terms means selling goods and merchandise on vendor credit terms. The seller can adjust the terms for each buyer’s requirement and the potential risk for extending the credit facility. Selling credit payment terms does not require bank approval or authorization.
Terms of sale are established in the vendor agreement or purchase order agreement. In such agreements, conditions regarding the goods and services are stated, including the following:
- Quality
- Quantity
- Delivery
- Warranties
- Payment terms and due date
- Return Policy
- Other terms and conditions
Keep reading the full article, Offer Credit Terms with Invoice Factoring.
What is the purpose of invoice credit terms?
Extending credit terms sets your customers’ time to pay for goods and services rendered. The purpose of payment terms is to provide creditworthy customers with a line of finance to do business with you. Sellers should set limits for the amount of credit they will extend to each customer and how long.
Credit terms are an excellent facility for buyers and sellers. Sellers can run into cash flow struggles when overextending credit. Buyers ultimately reap the benefits of being able to wait for 30, 60, or 90-days to pay after delivery. Accordingly, sellers can leverage credit terms to acquire more sales and customers but need financial backing to stay supplied with cash.
Keep reading the full article, How to Extend Credit Terms through A/R Financing.
How are selling credit terms written?
Payment terms determine when sales made on credit are due. The written format of terms follows a standard pattern. There are two main ways to offer credit terms. One way is a cash discount for early payment before the due date. The second way is to provide no discounts with a set due date.
Credit terms with cash discounts are written as follows:
- First is the cash discount percentage over the days you have to pay for the discount. 2%/10
- Second is the Net payment days. This is how many days from the invoice date the customer has to make payment. Net 30
- In this example, the customer would receive a 2% discount if paid within ten days. Regardless, the bill is due in full within 30 days. 2%/10 Net 30
Examples of seller credit terms
- Net 30: means the invoice is due within 30 days of the invoice date
- Net 60: is a 60-day payment period from invoice date
- Net 90 terms mean the invoice is due in 90 days.
- 2%/15 Net 90: offers a 2% discount on the invoice for payments received within 15 days. The due date is within 90 days of the invoice.
When should my business extend invoice credit terms?
Extending credit terms can help accelerate your sales. Still, proper cash flow management and financing can help your operations. In addition, some customers may require extended terms as part of their vendor agreement. For example, big box retailers need anywhere from Net 30 to Net 90-day terms.
If your business operates as cash on delivery or prepaid only, extending credit terms may open new customers for you. Establishing payment terms and credit lines for credit-worthy enterprises is essential. Extending bad credit can lead to cash flow struggles, going concerns, and potential insolvency.
What are the advantages and disadvantages of Net 30, 60, and 90-day terms?
Offering credit to your customers is a tool to increase sales, acquire commercial customers, and accelerate your accounts receivable (A/R). In contrast, your customers, the buyer, can purchase more merchandise and achieve more significant economies of scale. Selling on terms can benefit buyers and sellers.
Extending credit comes with the risk associated with the customer defaulting on the receivables. Sellers should implement a credit policy for their business and each customer. Protecting your assets is most important.
| Advantages of Credit Payment Terms | Disadvantages of Credit Payment Terms |
| Buyers have more time to pay invoices – pay after delivery | Sellers can run into cash flow struggles from long gaps in receiving payment |
| Sellers can close more sales | Longer days sales outstanding (DSO) |
| Strengthens customer relationships | Exposure to risk from customer default |
| Improves customer buying power | Requires more back-office accounting support |
Extend Credit Terms with Bankers Factoring A/R Financing
Businesses can confidently extend selling terms with the support of Bankers Factoring bad debt protection. Invoice factoring services help companies finance credit sales by selling receivables. When you sell your open invoices to receive cash flow funding, your business adds the support of finance experts. We remove the burden of managing your receivables so you can focus on your core business. Consistent cash flow is possible through factoring invoices to vendors selling on credit.