Determining Your Invoice Payment Terms

Net 30. Net 15. Due upon receipt. Net 60.

Just about every invoice ever generated has a term like that, specifying when payment of said invoice is due. But for most small business owners just starting out, determining their company’s payment terms isn’t a black and white decision. What’s too long? What’s too short? How will the customers or clients react?

So let’s add some guidance and cover some of the factors that small business owners should consider when it comes to setting their invoice payment terms…

Consider Cash Flow

Every small business has expenses. Rent, utilities, materials, equipment, payroll, partner vendors… the list literally can go on forever. These obligations, or liabilities, rely upon cash inflow. So when you’re invoicing your customers or clients, you need to consider the outflow. What are the terms of your bills? Can you prioritize them by due date? The point is, the gears that make your business go rely on cash inflow. And that’s a factor that needs to go into your invoice payment terms decision. You need to make sure the money’s there when it comes time to pay bills. So if your bills are due monthly, perhaps your invoice payment terms should be 30 days—or maybe even 15.

Avoid “The Day”

One of the last things you want is for all of your income to come pouring in on the same day that bills are getting paid. Not only does it create anxiety that your account could swing into the red—even for just a few minutes—but it also is going to get confusing. So if possible, set your invoice payment terms so they stagger the time period when your bills are due. You’ll have less anxiety and you’re less likely to incur any overdraft fee your bank might slap you with should that aforementioned “swing into the red” happens. (Note: “The Day” is of particular concern for small business owners just starting out. Hopefully, in time, you’ll build up a reserve and “The Day” won’t really be much of an issue.)

What’s Your Industry Standard?

The payment terms are going to be different for, say, an exterminator and a tech consultant. For the exterminator, who’s able to tap out an invoice on his iPad (*hint hint*) after treating a house, payment due upon receipt is entirely acceptable—especially if they take checks or use a service like Square. Conversely, the tech consultant might do a months worth of work for a client from perhaps a remote location and then send an invoice. Net 30 might be totally appropriate. The point is, get a sense for what others in your industry do. If you skew too far from that in either direction, it might ruffle some customer feathers. And speaking of customers…

Align Customer Expectations

The best way to avoid invoice payment term conflicts or surprises is to make them clear right up front. When signing on a new client, have the terms codified in your agreement. Not only will that keep both of you aligned, but it will also give you a legal leg to stand on should things not go swimmingly.

Be Fair

If your terms are, say, 30 days and a client doesn’t pay  within that timeframe, evaluate it on a case basis. Are they a new client? Because if so, grilling them the day after payment was due might not help the long-term relationship. If it becomes a trend though, that’s a different story—a story that likely ends with you not working for them. Again, this is where codifying a process in your agreement can help. Spell out what happens if a payment is late, when the customer will be notified, and when work will cease if payment is still not received.

Consider Incentives

While it may not be right for all businesses, providing a customer or client a discount should they pay their invoice early can be a great motivator—and it fills your bank account sooner! Be careful with this idea though as it ultimately eats into your bottom line.You have to ask yourself: what’s more valuable? Full payment later or a slightly-less-than-full payment now?

 

At the end of the day, the invoice payment terms you set will depend on a number of things—and it might even be different from customer to customer. Hopefully these thoughts helped and you’ve got a good idea of what to do. But one thing’s for sure, go do some work and generate an invoice!

 

 

 

Report from Support with Kashoo’s Nikki Layton

We are excited to announce Report from Support, a new monthly feature on the Kashoo blog that will highlight the most popular inquiries to the Kashoo Support Desk. Heading up the effort is our new Support Lead and Customer Engagement Specialist, Nikki Layton.

Style: "Neutral"Since Nikki has her finger on the pulse of the Kashoo customer community, she’ll be able to share most commonly asked questions, insider tips and tricks, and more. Because after all, even if just a handful of Kashoo customers are coming to the Support Desk with the same question, there’s a good chance more of you are wondering as well. We’ll then include links to related Help Articles so that you can learn more.

Sometimes this feature will be a quick write-up of the month’s hot-button support issues and other times it will be a “from the frontlines” video so that you can get to know your Support Champion even better.

Here’s a Quick Sample of What to Expect

This month from the Kashoo Support Desk, we’ve seen a number of inquiries related to…

(Click on each topic to view the Help Article.)

Hopefully this will be a useful and valuable feature for the Kashoo community. If you have any questions, contact the Kashoo Support Desk (naturally). And feel free to say hello to Nikki on Twitter!

 

 

A World Cup Comparison: Accounting and Football (Or Soccer to Us North Americans)

The World Cup is by far one of the most universal events on the planet. But rather than penning a piece on how much national GDPs decline during the 30 days of pure football thanks to “unproductive” work hours, we thought we’d pit the beautiful game against another universal truth: accounting! Stop laughing and just indulge us for a minute or two as we explain how soccer and bookkeeping are actually two peas in a pod…

world_cup_flags

Both Require Precision

Ever see how a Messi heel flick zips right to the foot of a teammate? A slightly different angle or perhaps too much force would send the ball in an errant direction, breaking down a goal-scoring opportunity. That’s precision. And it’s necessary in accounting too. A misplaced decimal point is serious. A debit without a credit is calamitous. Precision powers both football and accounting. End of story.

Both Take Endurance

The average midfielder clocks nearly 10 miles of walking-jogging-sprinting per game in a little more than 90 minutes. World Cup footballers are some of the most fit humans on the planet. Endurance is oftentimes what powers a team to a win (especially if you’re playing in the ungodly humidity of Manaus). On the accounting side, endurance is critical—particularly around tax time. And if you think about it, just as footballers train year-round to be optimally prepared for the World Cup, a savvy business owner or accountant will keep up with their accounting throughout the calendar in order to make tax time a little more digestible.

Both Have a Storied History

It is up for debate as to which has been around longer: accounting or football. Regardless, there are a few individuals who were critical in making these pursuits what they are today. Pele did… well… he did everything. Italian mathematician Luca Pacioli is widely regarded as the “Father of Accounting.” Diego Maradona channeled a higher power to nip England in 1986…

And there are a host of tech-savvy pros today that are blazing the trail of the future of accounting. (Shout-outs to Kelly Phillips ErbJason Blumer, Jody Padar, Jodie Buckler, Bri Norcross, Erin Rue, and so many more!)

Both Can Be Epically Painful

We all know the pains of accounting, so we don’t even need to get into all that. But on the soccer side of things, when outcomes don’t go as desired, the pain can cut deep. Just look at when Brazil fell to France in the 1998 Final. Or even more recently, the early 2014 exit of defending champion Spain. The point is, with so much vested in something, a negative outcome can be devastating… but you get back up and chart a new plan of attack.

Both Can Be Joyous

Just look at the emotional power on Clint Dempsey’s face after he scores. Now think about that feeling when your books are balanced or your estimated quarterly tax payments came out just right. See what we mean?

 

While we could go on and on about how accounting and football are one in the same, we’ll call full time here so that you can get back to “working” while the game is on in the background…

 

 

Business Payment Methods: How to Get Money Into Your Business Bank Account

One of the first things a new small business owner does (or should do) is set up a business bank account. (Your personal checking or savings account is not the right way to do business!) Once that’s all in order and work is being done or products are being sold, the objective is to fill said business bank account. Consequently, there are a number business payment methods that can make that happen…

Banking

Good Ol’ Cash

Especially for small retailers, cash is a big method of payment. At the low end of the spectrum, you can make daily or weekly trips to the bank to make your cash deposits. On the high end, an armored pick up does the job. Some banks even offer on-site safes with cash-scanning technology. Naturally there are costs associated with armored pick up and on-site safes.

Checks

This too is a bit of an old school way of getting paid but it’s still here, alive and kickin’. Most retailer business don’t take checks anymore, but for small businesses that are of the consulting type, checks are popular. The problem with checks though is that you still have to make the trip to the bank—unless your bank has mobile deposit. Ask them or check the App Store. But remember two things: 1. Just because your bank has mobile deposit for consumer accounts doesn’t mean they have it for business accounts… 2. There will likely be daily and monthly mobile deposit limits that might make this method useless to you.

Credit Card

Like cash and checks, there’s not a whole lot to say about credit cards. From a business perspective, they offer your customer convenience but, obviously, at a process cost to you.

ACH

“ACH (or Automated Clearing House) is an electronic network for financial transactions in the United States that processes large volumes of credit and debit transactions in batches.” (source) This is a particularly popular method of payment for business-to-business transactions.

Square

If you’ve walked into a coffee shop recently, there’s a good chance you’ve seen an iPad at the register that has a little widget stuck into the headphone jack. This little guy is Square, a credit card reader that lets business owners get paid by credit card. There are fees associated, but Square is super useful for the entrepreneur who’s always on the go, meeting with clients or customers, etc.

LevelUp

LevelUp is another interesting mobile payment solution. It let’s your customers pay with their phones (that are hooked up to a credit or debit card) and also builds in loyalty rewards. And while there’s a 1.95% processing fee, you learn a lot about your customers and can thus run customized advertising back at them.

PayPal

We’re all familiar with PayPal, especially if you’ve done any shopping online. But PayPal also makes it easy for online businesses to take a big chunk of risk out of getting paid either by PayPal or credit card. There are various tiers of service and costs.

 

The ways in which small businesses get paid seems to be evolving every day. And that’s a good thing so that you can find what’s right for you. Tell us on Twitter how your business gets paid.