Besides cash invoice terms, there are many different types of invoice payment terms that we’ve already discussed here, such as Net 30.
However, while Net 30 is a standard across all businesses and countries, it is not always the best for all businesses.
For different businesses, especially those involved in the shipment of physical goods, cash invoice terms may be better.
These cash invoice terms include cash on delivery, cash before shipment, cash in advance and cash with order.
These all require that cash be provided before the order is completed or when the order is delivered.
Today we’ll look at the two most important: cash on delivery and cash in advance.
Cash invoice terms – Cash on delivery (COD)
This type of cash invoice terms requires the customer to provide the payment in full when the client receives the goods. If the client does not pay, the goods will be returned to the seller.
Advantages of cash on delivery
This is particularly great for clients with credit cards, as this will minimize the risk of scammers. Because the payment is only required when the goods are received, the client will decide to pay or not.
For the supplier, COD can boost buyer confidence since they don’t have to pay until they receive the goods.
Disadvantages of cash on delivery
The client has the disadvantage of making unwise purchases, seeing as payment is deferred which can lead to impulse purchases.
For the seller, the risk is normally associated with the possibility that the customer won’t pay. In those cases, the seller has to pay the shipment costs for returned goods.
Cash invoice terms – Cash in advance
In this type of cash invoice terms, the client is required to pay for the goods in full before they are even shipped out.
You can normally see this with such popular sites as Amazon where nothing will be sent out until payment is received.
Advantages of cash in advance
For the client, there doesn’t seem to be a lot of advantages. Most of the advantages lie with the supplier.
The risks of credit or non-payment are eliminated because the supplier will receive payment before he or she has to send any goods.
Disadvantages of cash in advance
Cash in advance is not particularly amazing for the customer, mostly because the customer has to pay in full for the goods upfront before being allowed to check the goods.
There is also cash flow problems created for import/export businesses if they have to pay upfront.
Cash invoice terms for you
When you decide which payment terms are best for you, it is wise to look at a wide variety of various invoice payment terms.
The cash invoice terms mentioned above will be helpful for those businesses involved in shipping goods to their customers.
With the proper invoice payment terms, you’ll see your business getting better as your invoices are improved.
