Credit terms advisor
Not sure what payment terms to offer a new or existing customer? Answer five quick questions about your situation and get a tailored recommendation — with the reasoning behind it.
Why payment terms matter for debt recovery
The single most effective tool for reducing bad debt exposure is getting your credit terms right before you issue an invoice. Businesses that set appropriate payment terms — matched to their industry, customer profile and risk exposure — consistently experience lower rates of default and faster recovery when disputes arise.
Payment terms do three things. They set a clear legal due date, which is essential for any subsequent demand or legal action. They communicate your expectations to the customer before work begins, reducing the scope for disagreement later. And they determine how quickly cash flows back into your business — a 60-day term effectively provides your customer with 60 days of free credit at your expense.
Document before you deliver
Terms are only enforceable if the customer knew about them before engaging with you. A signed credit application that incorporates your terms and conditions — including your interest clause and late payment policy — is the foundation of any successful recovery action. Without it, a debtor can dispute the terms, the rate and your right to charge interest at all.
If a customer will not sign a credit application, that itself is information worth acting on. Consider requiring payment upfront or on delivery for unverified accounts.
Recommendations from this tool are general guidance only and do not constitute legal or financial advice. The right terms for your specific situation depend on your contracts, industry practice and individual customer circumstances. Always seek legal advice when drafting credit terms.