We find that by using the word ‘days’ instead of ‘net’ on an invoice customers are more likely to pay faster. It is clearer.
Atlanta, GA (PRWEB) June 24, 2014
C2C Resources, a global commercial debt collection agency, released an educational blog today that highlights the common early payment discounts that businesses often extend to their customers. The company believes that to decrease the amount of bad debt within a business, one tactic is to provide customers with early payment term discounts.
The credit terms offered to a customer for early payment need to be valuable to the customer, but not require the seller to pay a higher interest rate for the use of the money that it is receiving early. For example, extending these common terms provide the customer with the following interest rates: Net 30 terms have no effective interest; 1/10 Net 30 has an 18.2 percent interest; 2/10 Net 30 has a 36.7 percent interest; and 1/10 Net 60 has a 7.3 percent interest.
“Companies need to seriously consider the impact of extending early payment credit terms to customers,” explained Todd Tinkler, President of C2C Resources. “While it may be commonplace in many industries, you need to calculate the cost compared to the benefit.”
Of all the credit terms highlighted by C2C Resources in their educational blog post, the company suggests that a variation of the 2/10 net 30 early payment terms, depending on the interest rate that the company wants to extend, can be popular for companies looking to increase cash flow. This type of term speeds up the cash cycle.
The company further elaborated to explain: ROG terms, which require the customer to pay after the receipt of goods, should only be used when the buyers cannot expect delivery until a significant time after the order is placed. EOM terms, or end of the month, should be used sparingly when trying to minimize bad debt because it can become confusing to customers as to when the payment is due.
“If you are utilizing early payment terms to minimize debt, remember that if the customer does not understand when they need to pay, it won’t benefit you,” reminded Tinkler. “We find that by using the word ‘days’ instead of ‘net’ on an invoice customers are more likely to pay faster. It is clearer.”
For the full blog post and a complete overview of discount terms, visit: http://www.c2cresourcesblog.com.
About C2C Resources:
C2C Resources is a global Commercial Debt Collection agency headquartered in Atlanta, Georgia. The company collects commercial debt on behalf of their over 20,000 clients and is considered one of the top agencies in the country. The executive team at C2C brings more than 60 years of experience helping businesses collect their accounts receivable.
C2C’s powerful combination of Profit Maximizer, InfoMax Collection System, and Legal Forwarding Edge, can help your company be more effective with your own in-house collecting and maximize recovery of accounts turned over for collection.