3 Things Your Payment Terms Say About Your Company | Behalf
A Closer Look at Payment Terms
Payment terms play a significant role in your relationship with your customer. They don’t just determine how and when customers pay for goods and services; they also play a role in your customer’s decision process for which vendors they prefer to work with. The payment terms a company chooses – whether to force customers to pay-in-full upfront or allow them to extend payment over a set period of time – have a meaningful impact on how much business a customer can do with them. Technology is constantly transforming the landscape for how customers expect to pay, leaving it up to your company to adapt its payment terms to keep up with competitors. Regardless of what your company’s specific payment terms are, they must evolve to address your customers’ major payment concerns. At the end of the day, your company needs to get paid so you must both accommodate its customers and protect itself to ensure you receive payment.
Within an industry, companies may have different standards for payment terms but their customers tend to have similar payment concerns. As a result, payment trends like trade credit emerge. Many companies started extending trade credit upon request from their customers, who often prefer extending payment on large purchases. Others feel forced to follow suit when their competitors begin offering trade credit. Trade credit may give companies a competitive edge, but they can also undermine sales by attracting slow, non-paying customers and encouraging bad spending habits. In short, not all payment terms that glitter are gold. Nevertheless, you have to consider them in order to give your company a fighting chance against competitors. Choose wisely. Payment terms can shape the way leads and customers perceive your company. This article explains just what your payment terms say about your company.
The way your company configures its payment terms will demonstrate where its priorities lie. If your company wants its money fast, it may set its payment terms to be due upon receipt. The customer will have to pay as soon as possible with little to no leeway. These payment terms suggest that payment is your company’s top priority: you are willing to let customers walk-away if they do not have the cash to close. On the other hand, if your company has payment terms like Net 15 or Net 30, customers have a little more payment flexibility. Offering flexible payment to customers conveys that they are your highest priority. When you extend trade credit you are making an investment in your customer, trusting that they will pay the agreed amount at a later date. This display of confidence can strengthen the way customers perceive your company and their relationship with you.
2) Competitive Differentiation
Customers will inevitably compare your company to its competitors. They not only want the best quality products and services for the best price, but also the best buying experience. There is a push for companies to give customers more control over how they pay as the need for flexible payment terms consistently pops to the top in business customer satisfaction studies. Though offering payment terms may not initially seem critical, payment terms determine how much a customer can buy at any given time. If your business customer only has the cash to buy 5 widgets from you, but can leverage that same cash to buy 50 widgets from your competitor, it is a fairly obvious decision. Companies that extend flexible payment terms win more customers and enjoy higher average order value than those that do not.
Your company’s payment terms form the crux of your relationship with customers. If your payment terms are rigid and do not address your customers’ needs, your customers will reciprocate by being transient. Every purchase your customer makes will be a point to point price comparison and you will be forced to win their business again and again. Generous, flexible payment terms show your company cares about building a long term relationship with your customers. Extending customer-friendly payment terms is a great way to make your offering the most convenient choice for repeat business. In fact, when you focus together on having the best products and best experience, the actual price of your goods become less of a focus. Delivering a superior experience changes the discussion entirely and puts you on a path to enjoying true customer loyalty.
Not sure what to do about your payment terms? Consider a hybrid solution that gives your customers the extended payment terms they want while still ensuring you get paid immediately. Offering your customers 3rd party financing is the perfect way to modernize your payment terms fast without disrupting your cash flow management practices. NYC-based FinTech Behalf can provide your customers access to a purchasing credit line that will bring you all the benefits of extending trade credit without any of the risk. When you accept payment on your customers’ Behalf, they can pre-qualify for up to $50k in funds and create their own payment plan with up to six months of extra time. They can use the funds to make larger, more frequent business purchases and regardless of the payment terms they choose, you always get paid in full within 1 business day. No paperwork. No recourse. No uncomfortable collections calls.