The small business specialists
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These outline how customers pay for your goods and services and the details of when you expect payment. Payment terms will vary from business to business and generally refer to the payment methods you will accept, whether you provide credit and the terms of credit, and your debt collection policies.
Payment methods typically used by small businesses include:
Goods and services can be paid for upfront or on delivery, or are supplied on credit (where payment is deferred for a period of time after the goods or services have been supplied).
Offering credit increases your risk of being paid late, or not at all, so for customers you don’t know well consider upfront or on delivery payments, also in situations when have outlaid large amounts of money to supply the goods or service.
Your approach will vary depending on your business needs and cash flow requirements. Some businesses only accept payment on delivery and do not provide credit, other businesses offer both.
Standard terms of credit are often seven, 21 or 28 days.
If you provide credit it is advisable to develop a credit application process to screen customers and avoid those with a poor credit history.
Before providing credit to a customer it is important to check their credit worthiness.
Create a credit application form that includes:
The Australian Securities and Investments Commission (ASIC) website provides a list of credit information brokers offering a range of services, including credit check reports.
Decide whether to offer credit
Make a decision after:
Advise the customer of your decision
It is recommended to advise the customer in writing of your decision, even if you decline their application.
If you decide to provide credit let them know the:
If you’re unable to collect full payment up-front selling goods can be risky. If you register an interest in the goods you’re selling on the Personal Property and Securities Register (PPSR), you will have a better chance of recovering the debt if your customer doesn’t pay or goes broke. This is also recommended if you lease or hire goods, or sell goods with a retention of title clause.
Examples of property that you might want to consider registering include:
Learn more about the PPSR by downloading the book 'Are you in business?' from the ASIC website.