Likewise, cash flow problems can spring up if you misjudge your own accounts payable, and offer net terms that don’t provide you the capital to pay on time. Assume that every customer will max out their net terms—meaning if you offer net 30, assume the customer will pay on Day 30. It takes careful planning to make sure you set net terms that allow you to keep your own invoices paid on time. Sometimes, if you’re a B2B transacting with mostly smaller businesses, you might not have much choice when it comes to offering extended payment terms to your clients. The good news is that convenient, online payment tools are now available, allowing many small business owners to lay down the burden of playing “bank” for good. While there can be advantages to settling invoices with suppliers early, businesses can also be penalized for making late payments.

Ally offers simple, easy-to-use accounts with few fees and generous interest-earning potential. Capital One’s savings account APY beats most national banks and is net terms competitive among online banks. But if merely getting the highest possible rate is your goal, you can usually find a smattering of online banks with better offers.

Early Payment Discounts

Otherwise, you will likely experience strains in your cash flow and mix-ups in following up on pending customer payments. That said, offering practicable payment terms like discount terms effectively entices customers to choose you over your competitors. It is crucial to identify which invoices are due and which ones still have pending payments. Doing so avoids gaps in your accounting records and prevents charging customers who have already paid their invoices. If you find that a standard net payment arrangement such as net 30 isn’t feasible for your business model, one alternative is to offer shorter terms.

Again, these late fees tend to be a certain percentage of the total cost and added as interest for failure to meet the payment terms. Especially if you use longer payment deadlines, you can consider offering discounts. For a Net 30 payment term, 2/10 Net 30, or even 2/7 Net 30, can speed up payments. Importantly, this still gives customers the option to pay later if it helps cash flow. Plus, including payment terms helps you stay in control of the billing process.