Hi there, Victoria from HBA Encompass. And today, I just want to have a little chat about debtor terms and what’s best practice. And to be honest, there is no best practice. At the end of the day, it’s your business, you can determine what terms you require people to pay you in. The shorter that you can make it, the better it’s going to be. Here at HBA Encompass, we either have payment up front, and then payment on completion. If they are invoices that don’t go through that system, then it’s always a seven day invoice. And that means that we get paid promptly for the work that we’ve done, which we believe is only fair because we’ve done the work. So I’m sure that you and your business would feel exactly the same. So my suggestion to you is to make those terms as short as you can, you may find with bigger suppliers or bigger customers that you need to extend them. Government departments and mining companies are the worst to deal with because they generally want 30 days plus end of month or even 45 days plus end of month. Now what that means is if you invoice someone on the first of September, then 30th, September is end of month, they’re going to pay you 45 days after that, which means it’s going to be the 15th of November. So you have effectively done the work on day one and get paid on day 75. So think about how that’s going to affect your cash flow. If you are going after these big clients, then you need to have contingencies in place to make sure you’ve got the cash flow in hand to be able to pay your bills when they do pay your staff and to manage until times as you do get paid. Now obviously, the first payment is the worst because after that bills will come in on a regular basis on the 15th of each month. But my suggestion to all business owners is that there is no best practice, negotiate with your customers and get those payment terms down as early as you can and where possible if you can get upfront payments. So that’s best practice for debtor terms. Just a side note, make sure you do have an agreement that your customers sign to say that they are going to pay you and where possible, get directors guarantees for payment, because if someone goes down and they’re in an entity, the liquidator can close the entity down, you don’t get paid. But if you’ve got directors guarantees, you can go after bthe individual themselves. And I can tell you right now it saved a lot of our clients a lot of grief. So that’s debtors terms. If you’ve got any questions, of course, give us a call in the office 0754 47094 or jump on the website hbaencompass.com.au and book an appointment from there.
HBA Debtor Terms
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