Payment terms
A company's payment terms basically relate to the terms a creditor sets for its payments - including, for example, the deadlines that apply when an invoice is sent to a debtor.
The company has almost free rein when it comes to payment terms and can therefore decide for itself how long a payment period it wants to give.
Payment terms are typically integrated into the company's general terms and conditions, which set the terms for the sale and delivery of goods and services.
Therefore, not all businesses have separate payment terms; instead, they are part of the overall terms of sale.
It is important that the payment terms are clearly stated on relevant platforms such as the company's website, webshop or in submitted offer material.
Payment terms as a competitive parameter
Few customers are immediately interested in a company's payment terms, as the focus is often on the product or service.
Nevertheless, payment terms are, in our opinion, an important competitive parameter in many industries and for many customers.
If a company sells a standard product that can be bought in any DIY store, it's often not the product itself that you can compete on - but factors such as delivery, price and, not least, payment terms.
For example, a tradesman who can get 10, 20 or even 30 days of credit at one DIY store rather than cash at another is likely to choose the DIY store with the best credit options and thus the most favorable payment terms.
This way, the craftsman can purchase materials, use them with his customers and only pay the DIY store when he receives payment from his customers.
Favorable payment terms mean that the craftsman does not have to draw on his own liquidity or take out a loan to carry out his work.
Payment deadlines
Payment terms are a key part of a company's payment terms - but how much notice should you give your customers?
Basically, it is up to the creditor to set their own payment terms, including the payment deadline.
Some businesses, such as physical stores, require cash payment, while others offer a certain payment term.
In our experience, many companies choose to give a payment term of 7 days.
You can read more about payment terms here.
If payment terms are not met
Fortunately, if a debtor does not comply with the payment terms and the payment deadline is missed, for example, there are several options for recovering the amount owed.
Most creditors and collection agencies will typically start by sending a reminder letter, either with or without a reminder fee. If this is not sufficient, debt collection may be a solution.
One option is self-collection, where the creditor handles all or part of the collection process themselves. This involves sending out debt collection alerts, making calls and adding fees.
If self-collection is unsuccessful or the creditor doesn't want to handle the process themselves, they can opt for third-party debt collection - where a debt collection company or lawyer handles the case on behalf of the creditor.
Read more about the debt collection process here.
