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Credit terms

When you're selling, offering credit is a great way to build strong relationships and increase the amount they spend. And when you're buying, taking advantage of the credit offered to you is a great way to control your cashflow.

Setting credit terms

What terms can you set?

Payments can be due immediately (such as cash), in a number of days or on a day of the month.

When choosing your customer terms, it's a good idea to learn how unpaid amounts are aged and how they appear in customer statements.

The following examples apply to both setting customer and supplier terms.

Option

Description

Prepaid

Payment is due before goods are delivered.  

You might use this for website sales where payment is made upfront before the goods are shipped. Leave the Discount Days and Balance Due Days fields as zero.

On a day of the month

Enter the day of the month when payment is due. For example, if you enter 15th, and a sale or purchase is made on the 14th of the month, payment is due the next day. And if the sale or purchase is made on the 16th, payment is due on the 15th of the next month,

You might use this option when payment is due on the same day for all your customers, such as a monthly subscription or membership dues.

In a given number of days

Enter the number of days before payment is due, like 7 days.

Day of month after EOM (End of Month)

Set the day of the month after the current month that payment is due, such as EOM (the last day of the month). Use this option if payment is due on the last day of the month, regardless of the number of days in the month.

COD (cash on delivery)

Payment is due when goods are delivered.

You'd use this for cash sales where no terms apply. Leave the Discount Days and Balance Due Days fields as zero.

# of days after EOM (End Of Month)

Enter the number of days after the current month that payment is due, such as 28 days.

Note that as you're setting a fixed number of days, entering a number such as 30 or 31 may affect customer statement reporting for months with less than 30 or 31 days. If payments are due on the last day of the next month, use the following option.

Example of credit terms

In the following example, assume a sale or purchase is made on 10 March. The due date depends on the terms and the balance due date entered.

Option

Balance due days/date

Payment due

COD (cash on delivery)

0

10 March

Prepaid

0

10 March

In a given number of days

7 days

17 March

On a day of the month

15th of month

15 March

# of days after EOM (End Of Month)

31 days

1 May

Day of month after EOM (End of Month)

EOM

30 April