Creating a Credit Policy – Early Payment:
10. Are you going to reward Early Payment?
The cost of capital is real, and good behavior from clients and customers is often rewarded. Decide early, are you going to reward those that pay early with favorable terms? One often used method is 2/10 net 30, meaning an upfront discount of 2% if paid in 10 days, otherwise, payment is due in 30. However, a caution needs to be put in place. Oftentimes, clients will take the early discount, regardless of whether or not they are on time, and you might find yourself expending effort to recover the discount, or forgiving it in the interest of the relationship with your client.
Your credit policy will be what incentivizes your client to pay on time or even early. Your business has a real expense when it comes to the management of past due business credit, and you owe it to yourself to have a systematic and clearly defined way of getting back what is owed to you.
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