It is quite common for consumers to be offered financing options when making a large purchase. While a home mortgage or car loan might be the first two things that come to mind with consumer financing, it is quite common for consumers to receive financing when purchasing other big ticket items such as furniture or appliances. Being offered a payment plan that allows a consumer to make monthly payments over a specified period of time allows them to purchase big ticket items that they may not be able to afford otherwise. However, in the world of B2B (business to business), payment plans are not available, instead businesses are offered net payment terms. With a net 30 day invoice, a business is given 30 days to pay, but must pay the entire balance after 30 days. Offering longer payment terms will benefit the company purchasing a product, but will hurt the vendor as they need to wait even longer to get paid or pay a higher fee to factor the receivable. However, there is a happy medium and that is offering net 30-60-90 day terms.
Net 30-60-90 day terms is a simple way of offering a business a payment plan. They pay one third of the invoice in 30 days, another third of the invoice in 60 days, and the final third of the invoice in 90 days. While it may not be the same as the 36 months a consumer gets to pay for a new sectional, it does still allow the business to spread out payments over three months and make smaller installment payments rather than pay the full balance all at once.
From the vendor’s point of view, it is much better to offer customers net 30-60-90 as opposed to just offering them net 90 day terms. Receiving a portion of the invoice after 30 days, another portion after 60 days, and the balance after 90 days, instead of waiting for 90 days for the entire amount, helps improve cash flow. If the vendor is factoring the account, while they would get funded when the order ships in either scenario, they are able to reduce the factoring fees if they are offering net 30-60-90 day terms. Instead of having to pay a fee for net 90 day invoice, the vendor is effectively only paying a fee for net 60 day invoice since the payment terms average out to 60 days.
Another benefit of net 30-60-90 day terms over net 90 day terms is that is makes it easier for the customer to make the payments. Paying for a third of an invoice is always much easier than having to pay the entire balance. Even though the entire invoice still gets paid over 90 days, its oftentimes easier for a business to pay a smaller amount several times than to make one large payment all at once. For one it is much easier to budget for as it is smaller monthly payments, but there is also no need to set aside money each month for a large payment that is due in 90 days.
If you feel you could benefit from offering your customers net 30-60-90 day terms but are worried about how it may affect your cash flow, now would be a great time to consider factoring. DSA Factors is a family-owned and run business that has been factoring for over 35 years. We work with a wide variety of industries and also have the ability to provide purchase order financing. Give us a call today at 773-248-9000, email us at firstname.lastname@example.org, or chat with us right here on this web page to learn more about how you can offer your customers more time to pay.