Payment Terms Setup

Payment Terms Setup

Payment terms define when customers are expected to pay for their purchases. Configuring payment terms in Sales Settings helps streamline invoicing and ensures consistent payment expectations across all sales transactions.

Accessing Payment Terms Settings

To configure payment terms:

1. Navigate to Settings → Sales Settings → Sale Settings
2. Look for the Payment Terms section
3. Alternatively, go to Settings → Sales Settings → Payment Terms (if available as a separate section)

Understanding Payment Terms

Payment terms specify:

• Due Date: When payment is expected
• Payment Period: Number of days allowed for payment
• Payment Conditions: Special conditions or discounts
• Default Terms: Standard terms applied to new invoices

Default Payment Term

Set a default payment term that will be automatically applied to new invoices:

1. Select a payment term from the Default Payment Term dropdown
2. This term will be pre-selected when creating new invoices
3. You can still change it for individual invoices if needed
4. Common default terms include:
   • Due on Receipt (Immediate payment)
   • Net 15 (15 days)
   • Net 30 (30 days)
   • Net 45 (45 days)
   • Net 60 (60 days)

Payment Term Required

Configure whether payment terms are mandatory:

• Enable "Payment Term Required": Makes payment term selection mandatory when creating invoices
• Benefits:
  • Ensures all invoices have payment terms
  • Prevents invoices without due dates
  • Helps with payment tracking
• Disable: Allows creating invoices without payment terms (not recommended)

Common Payment Term Types

Immediate Payment

• Due on Receipt: Payment expected immediately
• Cash on Delivery (COD): Payment at time of delivery
• Prepaid: Payment before delivery
• Best for: Retail, small transactions, new customers

Net Terms

• Net 15: Payment due within 15 days
• Net 30: Payment due within 30 days (most common)
• Net 45: Payment due within 45 days
• Net 60: Payment due within 60 days
• Best for: B2B transactions, established customers

End of Month (EOM)

• EOM: Payment due at end of month
• Net 15 EOM: 15 days after end of month
• Best for: Regular customers, monthly billing cycles

Discount Terms

• 2/10 Net 30: 2% discount if paid within 10 days, otherwise net 30
• 1/15 Net 45: 1% discount if paid within 15 days, otherwise net 45
• Best for: Encouraging early payment

Creating Custom Payment Terms

To create custom payment terms:

1. Navigate to Settings → Sales Settings → Payment Terms
2. Click "Add New" or "Create Payment Term"
3. Enter payment term details:
   • Term Name: Descriptive name (e.g., "Net 30 Days")
   • Days: Number of days until payment is due
   • Description: Additional details about the term
4. Save the payment term
5. It will now be available in the dropdown when creating invoices

Payment Term Calculation

EquiBillBook automatically calculates due dates based on:

• Invoice Date: The date the invoice is created
• Payment Term: The number of days specified in the term
• Due Date: Invoice Date + Payment Term Days

Example:

• Invoice Date: January 1, 2024
• Payment Term: Net 30
• Due Date: January 31, 2024

Customer-Specific Payment Terms

You can set payment terms at the customer level:

• Each customer can have a default payment term
• This term will be automatically applied when creating invoices for that customer
• You can still override it for individual invoices
• Configure in Customers → Edit Customer → Payment Terms

Payment Terms and Aging Reports

Payment terms are used for:

• Aging Reports: Categorize receivables by age (Current, 1-30 days, 31-60 days, etc.)
• Overdue Tracking: Identify invoices past their due date
• Collection Management: Plan collection activities based on due dates
• Cash Flow Forecasting: Predict when payments will be received

Best Practices

• Set realistic terms: Match terms to your cash flow needs
• Be consistent: Use standard terms across similar customers
• Document exceptions: Keep records of special terms for specific customers
• Review regularly: Periodically review and update payment terms
• Communicate clearly: Ensure customers understand payment terms
• Enforce consistently: Apply terms consistently to maintain credibility
• Consider industry standards: Align with common practices in your industry

Payment Terms for Different Business Types

Retail Business

• Typically: Due on Receipt or Cash on Delivery
• Some B2B retail: Net 15 or Net 30
• Focus on immediate payment

Wholesale Business

• Typically: Net 30 or Net 45
• May offer early payment discounts
• Longer terms for established customers

Service Business

• Typically: Net 15 or Net 30
• May require advance payment for large projects
• Milestone-based payments for long projects

Manufacturing

• Typically: Net 30 to Net 60
• Longer terms for large orders
• Progress payments for custom orders

Early Payment Discounts

Configure discounts for early payment:

• 2/10 Net 30: 2% discount if paid within 10 days, full amount due in 30 days
• Benefits:
  • Encourages faster payment
  • Improves cash flow
  • Reduces collection efforts
• Configuration: Set up in payment term or invoice settings
• Calculation: System automatically calculates discount amount

Troubleshooting

Due date not calculating correctly:

• Verify payment term days are set correctly
• Check invoice date is correct
• Review payment term configuration
• Ensure system date is accurate

Payment term not appearing in dropdown:

• Verify payment term is active
• Check if it's been deleted
• Refresh the page
• Check user permissions

Default payment term not applying:

• Verify default payment term is set in settings
• Check if customer has specific payment term
• Review invoice creation process
• Clear browser cache if needed

Integration with Other Features

Payment terms work with:

• Invoice Creation: Automatically set due dates
• Payment Reminders: Trigger reminders based on due dates
• Aging Reports: Categorize receivables by age
• Overdue Alerts: Notify about overdue invoices
• Cash Flow Reports: Forecast expected payments

What's Next?

After setting up payment terms, you should:

1. Configure default payment term for your business
2. Set customer-specific payment terms where applicable
3. Test invoice creation to verify due dates calculate correctly
4. Set up payment reminders for overdue invoices
5. Review aging reports to track payment performance

Proper payment terms configuration ensures consistent payment expectations, improves cash flow management, and helps maintain healthy customer relationships.