How to Offer Net 30 Day Terms with Confidence

After long negotiations, your star salesperson makes a big sale to a new client. This is a big enough sales that it could easily make your year. There is only one minor catch - your client is asking for net 30 terms. They will pay your invoice 30 days after receipt. In the meantime, you need to cover all costs of the sale (products and services) plus all your business costs. Should you make the sale?

It's a tough question to answer. If you are confident that your client can pay the invoice, then making the sale is probably a good idea. If you are not confident they will pay then you should be very careful and remember that it's only a true sale if the client pays.

But how can you determine if your new client will pay? The best way to determine if your new commercial client is likely to pay their invoice is to check their commercial credit. A good commercial credit report will provide your clients track record of paying clients and will suggest a credit limit. Although credit reports are not perfect, they are a very good tool to have if you need to make a quick decision. If you need to make a credit decision for a very large sale, you should consider buying reports from several providers and doing more thorough credit evaluations. Two well known providers of credit reports are Dun and Bradstreet and Experian Business Credit.

There is another problem with net 30 sales. What if you want to make the sale but cannot afford to wait 30 days to get paid? If you have that problem you should consider factoring the invoice. Invoice factoring is a form of financing which advances funds against your invoices from credit worthy commercial clients. The quick payment by the factoring company also enables you to offer net 30 day terms with confidence, knowing that you can finance the invoice if you need money sooner.

When you factor an invoice you get two payments. The first payment is given upfront, as soon as your invoice the client. It's usually for 80% of the invoice. The second payment , the remaining 20% (less fees) is given once your client actually pays the invoice.

One of the advantages of invoice factoring is that your financing line is dynamically tied to your company's sales. This enables to grow your business knowing that you can always tap into the factoring line if you need to fund your invoices.