cashflow
Payment Terms
The contractual rules for when and how customers pay you. The lever that controls cash flow.
Definition
Payment terms define when invoices are due (net 15, net 30, net 60), what payment methods are accepted, what discounts apply for early payment, what penalties apply for late payment. They are the most overlooked cash flow lever in most service businesses. Industry norms have drifted toward net 60 in enterprise B2B, which is brutal for cash flow. Strong payment terms (50% upfront, net 15 on balance) can transform cash flow without changing pricing or volume.
In your business
- →Default to 50% deposit + net 15 on balance - don't accept net 60 by default
- →Add a 1-2% early-pay discount (2/10 net 30) - the math usually works in your favor
- →Late fee 1.5%/month makes late payment expensive enough to matter