The Right Way to Offer Net 30 Terms to Your Commercial Clients

One of the toughest challenges that business owners face is that clients never want to pay their invoices immediately upon receiving the service or the product. Most clients, especially large corporations, demand to be given 30 to 60 days to pay their invoices. Offering trade credit, as providing net 30 day terms for payment is usually called, is very common in commercial transactions. It's the way business operates. And when done correctly, it can be very safe and give you an advantage over competitors that can't offer net 30 terms.

But should you offer this to any client just because they ask? No, not without doing a little bit of research about your client.

There are two simple ways to research a client. The first one invoices getting a commercial credit report from either Dun and Bradstreet or from Smart Business Reports. A commercial credit report, which anyone can buy, provides useful information about your clients. It shows liens, judgments and more importantly, it shows how quickly your client pays their invoices. The payment history is the most important piece of information on the credit report. Most reports will also give you a credit score and a credit recommendation. You can buy these reports by going to Dun and Bradstreet's or Smart Business Reports respective web sites.

However, not ever company has a credit file with Dun and Bradstreet or Smart Business Reports. This is especially true for small and medium sized companies that don't have a wide exposure. In that case, your best alternative is to ask your client to submit a credit application which includes references. Be sure to check on those references and about their payment experience and average outstanding volumes.

What if your problem is that you cannot wait 30 days to get paid because you need funds to run your business? One alternative is to go to an institution to try and obtain business financing. However, in this economy, getting a business loan is very hard. Another alternative is to factor your invoices. Invoice factoring is a form of financing that give you an advance for your net 30 invoices. It provides the working capital you need, without having to wait for your clients to pay you first.