Customer Payment Terms

Customer Payment Terms

Payment terms define when and how customers are expected to pay for their purchases. Setting appropriate payment terms helps manage cash flow and establishes clear expectations with customers. This guide explains how to configure and use payment terms in EquiBillBook.

What are Payment Terms?

Payment terms specify the time period and conditions under which customers must pay for their purchases. Common examples include:

• Due on Receipt: Payment due immediately
• Net 15: Payment due within 15 days
• Net 30: Payment due within 30 days
• Net 60: Payment due within 60 days
• End of Month (EOM): Payment due at the end of the month
• 2/10 Net 30: 2% discount if paid within 10 days, otherwise net 30 days

Why Set Payment Terms?

• Cash Flow Management: Predict when payments will be received
• Clear Expectations: Set clear payment expectations with customers
• Automated Calculations: System automatically calculates due dates
• Reporting: Generate reports based on payment terms and due dates
• Payment Reminders: Send automated reminders based on due dates

Setting Up Payment Terms

Before assigning payment terms to customers, you need to set up payment terms in the system:

1. Navigate to Settings → Sales Settings → Payment Terms
2. Click "Create New" or "Add Payment Term"
3. Enter the Payment Term Name (e.g., "Net 30", "Due on Receipt")
4. Configure the payment term details (days, discount, etc.)
5. Save the payment term

Note: Payment terms are typically set up once by administrators and then assigned to customers.

Assigning Payment Terms to Customers

You can assign payment terms to customers in several ways:

Method 1: While Creating a Customer

1. Go to Customers → Add Customer
2. In the Financial Settings section, find "Payment Terms"
3. Select the appropriate payment term from the dropdown
4. Save the customer

Method 2: Editing Existing Customers

1. Go to Customers → Customer List
2. Find and edit the customer
3. Update the Payment Terms field
4. Save the changes

Method 3: Default Payment Terms

• You can set a default payment term in sales settings
• This will be automatically assigned to new customers if not specified
• You can override the default for specific customers

How Payment Terms Work

When you create an invoice with a customer that has payment terms assigned:

• The system calculates the Due Date based on the payment terms
• For example, if payment terms are "Net 30" and invoice date is January 1st, due date will be January 31st
• The due date appears on the invoice and in customer statements
• Overdue invoices are identified based on due dates

Common Payment Term Types

Immediate Payment

• Due on Receipt: Payment expected immediately
• Common for cash sales or POS transactions

Net Terms

• Net 15, Net 30, Net 60: Payment due within specified days
• Most common type of payment terms
• Net 30 (payment due in 30 days) is very common

End of Month

• EOM: Payment due at the end of the month
• Useful for recurring business relationships

Discount Terms

• 2/10 Net 30: 2% discount if paid within 10 days, otherwise net 30
• Encourages early payment

Payment Terms and Invoices

Payment terms affect invoices in several ways:

• Due Date Calculation: Due date is automatically calculated
• Invoice Display: Payment terms and due date appear on invoices
• Overdue Tracking: System tracks overdue invoices based on due dates
• Payment Reminders: Automated reminders can be sent based on due dates

Payment Terms Best Practices

• Industry Standards: Use payment terms common in your industry
• Customer Type: Different terms for different customer types (retail vs. wholesale)
• Cash Flow Needs: Set terms that align with your cash flow requirements
• Customer Relationships: Adjust terms based on customer relationship and payment history
• Clear Communication: Clearly communicate payment terms to customers
• Consistency: Use consistent terms for similar customer types

Updating Payment Terms

You may need to update payment terms when:

• Customer payment behavior changes
• Business relationship evolves
• Cash flow requirements change
• Industry practices change

Note: Changing payment terms for existing customers will apply to new invoices. Existing invoices retain their original due dates.

Payment Terms Reports

Use payment terms in various reports:

• Aging Reports: Analyze outstanding balances by payment terms
• Due Date Reports: View invoices grouped by due dates
• Payment Performance: Analyze customer payment performance by terms

Related Topics

• Creating Customers
• Customer Credit Limits
• Customer Payments
• Accounts Receivable Reports
• Payment Reminders