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Terms of sale are what will keep you in positive cashflow. As a new business you can’t afford to finance other people. You need to keep cash flowing through your business so you have to set clear terms of sale from the start.

Terms of Sale Tips

Don’t be too quick to give new clients credit. You can really get taken to the cleaners if your terms of sale include generous credit extension. If you do offer credit, keep the limits relatively low until the client has built-up a solid credit history with you.

Always insist on written agreements as part of your terms of sale. Verbal promises are for amateurs. Even if everybody knows everybody in your town, you should insist on a simple one or two-page agreement that clarifies your role, responsibilities, and obligations.

Always get a deposit check on any major project. Require 25% at the absolute minimum and 50% if you can get it.

Bill weekly and not when you get around to it. A lot of people start off sending their bills out every week, but then they get really busy and it slows to every three or four weeks. The reason for setting favoriable terms of sale is to get money into your bank account, not let your clients keep it in theirs.

Always enforce your credit policies. When you have a late payment, send past due notice or make a phone call to make sure the invoice gets paid.
Make sure you have funds set-aside for the inevitable dry spell. Despite rigourous terms of sale you will have slow periods. Don’t get cuaght with insuffienct funds.

The Bottom Line on Terms of Sale

Setting appropriate terms of sale is an important function. You need to understand your total capital needs and that includes monitoring your daily cashflow. Make sure your terms of sale are such that you are not caught short. When you do the work, you expect to be paid and the best way to protect yourself is by setting, and sticking by clear and reasonable terms of sale.

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