Should I offer payment terms to customers?
The answer depends on your business type and who you’re selling to. For retail and direct-to-consumer services, payment at time of service is standard. For B2B work, construction projects, and professional services, offering payment terms is often necessary to win jobs and maintain relationships.
If you work with other businesses, they typically expect some form of credit terms. Net 30 is common, though some industries work on Net 15 or longer. Refusing to offer any terms can cost you contracts, especially with larger clients who have established procurement processes and fixed payment cycles.
The trade-off is cash flow. Every day between completing work and receiving payment is a day you’re financing your customer’s project. If you have $50,000 in outstanding receivables on Net 30 terms, that’s $50,000 of your money tied up waiting. For businesses with thin margins or seasonal slowdowns common here in MetroWest, this creates real strain.
Before offering terms, consider your cash position. Can you cover payroll, materials, and overhead while waiting 30 or 45 days for payment? If not, you need better cash reserves or need to factor that financing cost into your pricing.
Structure terms to protect yourself. Require deposits on large projects. Many contractors in the Boston area collect 25 to 50 percent upfront before starting work. Run credit checks on new customers requesting terms. Include late payment fees in your contracts and actually enforce them. Consider offering a small discount for early payment if improving collection speed matters more than the few percentage points you give up.
Who you extend credit to matters as much as whether you offer it. A long-standing customer with a clean payment history is a different risk than a new customer you’ve never worked with. Some businesses offer terms only to established accounts and require payment upfront from new customers until they prove reliable.
Track your receivables aging consistently. Money that’s 30 days past due needs a reminder. Money that’s 60 days past due is a problem. Money that’s 90 or more days past due is often money you’ll never collect. Working with local bookkeepers who understand your business can help you spot collection issues before they become write-offs.
If managing receivables sounds like more than you want to handle, systematizing the process makes a significant difference. Clear invoicing, automated reminders, and consistent follow-up routines get you paid faster. A structured invoicing and collections process turns what feels like awkward chasing into a predictable part of your operations.
Greater Boston's Trusted Bookkeeping Partner
The Next Step:
A Short Conversation
We'll ask a few questions, figure out what you need, and give you a straightforward quote.
More Questions
How do I track change orders in my bookkeeping?
Set up each change order as a separate sub-project or line item within the main job. Code all labor, materials, and subcontractor costs to that specific change order so you can see profitability on the base contract versus extras.
Read answerWhy does my business have cash flow problems?
Cash flow problems usually come from timing mismatches, not lack of profitability. Money is going out before it comes in. The most common causes are slow-paying customers, paying vendors too quickly, or seasonal revenue swings without reserves to cover the gaps.
Read answerShould I use accrual or cash basis accounting?
It depends on your business type and what you need to see. Cash basis is simpler and works for smaller service businesses with quick collection cycles. Accrual shows true profitability by matching revenue to the work that earned it, which matters more for contractors and businesses with significant receivables.
Read answerHow do I manage cash flow as a contractor?
Construction cash flow is uniquely challenging because you pay for materials and labor before clients pay you. Managing it requires deposits upfront, progress billing, weekly AR tracking, and cash reserves for slow periods.
Read answerWhat bookkeeping challenges do retail stores face?
Retail stores face unique challenges including high transaction volumes, inventory tracking, cash handling, multiple payment methods, and seasonal cash flow swings. Each creates opportunities for errors that compound quickly without proper systems in place.
Read answerHow do I know if my bookkeeping is accurate?
Bank reconciliation is the foundation. Beyond that, your financial statements should match reality: actual cash, receivables you recognize, margins that make sense. If the numbers surprise you, something's off.
Read answer