Why Cash Is King

As a business person, would you rather receive or give a 0% loan? The answer to the question is obvious, but many young entrepreneurs end up giving 0% loans to their customers when they provide their product/service and get paid 30, 60, and sometimes even 90 days later.

Why Payment Terms Are Important

One of the most important lessons that I've learned as an entrepreneur is that cash is king. And, when I say cash, I'm not talking about revenue or profit. I'm talking about cash in hand. A difference in the payment terms you negotiate with customers and suppliers can make the difference between whether your business is in business or out of business.

Your cash is not only important for survival, but it's also important for making expenses necessary for growth and paying your bills on time so you can have good credit. Credit is extremely important because it is one of the major factors that determines whether your accepted for loans and what interest rate your given once your accepted. In fact, over 80% of small businesses depend on credit.

How to Get Good Payment Terms

• Realize that Payment Terms are Negotiable. Although there are different standards for different industries, you should always try to get paid as quickly as possible, preferably before you even deliver your product/service.
  
• Follow Up. You'd be surprised at how many checks get lost in accounting departments because one piece of information is missing. You'd also be surprised at how many people forget to submit or process your paperwork.
  
• Keep Good Records. When you're starting a business, you will have a million things on your mind. Proceed at your own peril, if you think you can send an invoice to a customer and then just forget about it.
  
• Know the Potential Payment Terms.The most popular payment terms are:
  1. Pre-ordering (before a product is available for sale)
     
  2. Upon signing of the contract
     
  3. Upon satisfactorily completing project milestones
     
  4. Upon full delivery of the product/service
     
  5. Upon purchase of the product/service
     
  6. Net 30
     
  7. Net 60
     
  8. Net 90