The opposite of giving a supplier credit terms is to offer your customers discount for early payment. Unless you’re very fortunate to have a business that is immediately cash generative, then you’ll be watching your cash flow every day. And you should be doing that anyway! Your cash will go up when customers pay you and down again when you pay for a supply. A supply may be something for the office or a service like marketing expenditure (an indirect cost) or for more of the products you sell (a direct cost). If you sell a service you may not have any direct costs.
If you have customers who have credit terms with you; either because they have demanded terms as a prerequisite for doing business, or because you’ve offered it to them, then you can offer a discount if they pay early.
For example; if your customer has 30 day terms, then they will normally pay you 30 days after you have supplied your product or service to them. You might decide you want their cash earlier and offer them a 1% discount to pay on 10 days instead. They will want to negotiate the early payment terms, so don’t go in too high at the start of negotiation. Remember, whatever terms you get come off the money you make for the sale, and that cuts into your profit.
A word of warning though: Business is about confidence. I have confidence that you will sell my product and will pay me for it. You have confidence that I can supply and that my product is reliable. We both have confidence that our businesses have the financial strength necessary to continue. Any whiff of financial problems and the parties will run for the hills.
Asking for cash for early payment is a legitimate way to do business, but just be careful about why you want it and what you tell your customer.
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