For small business owners, cash flow is the lifeblood that keeps their ventures running smoothly. Managing invoices and ensuring timely payments from clients and customers is crucial to maintaining a healthy cash flow. But if you’re a new business owner or perhaps snoozed through your accountancy classes at University (we’re not judging!), it can be a daunting challenge to understand these terms and understand what they mean for your business.
So, in this post we’ll delve into the 10 most common invoice payment terms and shed light on what they mean for your business. Get your pen and paper ready- no napping in this class!
1. PIA – Payment in advance
Payment in advance is pretty much what it says on the tin. It requires a customer to pay the full amount on an invoice before any work or supplies are delivered.
2. CIA – Cash in advance
Like payment in advance, cash in advance requires customers to pay the full amount of an invoice in cash before any goods or services are delivered.
3. Upon receipt
After delivery of goods or services and the invoice is received (upon receipt), the customer is expected to pay the supplier in full immediately.
4. EOM – End of the month
When this is found on an invoice it indicates that payment is due and the seller expects payment by the end of the month of the date stipulated on the invoice.
5. Net D
When Net D/X appears on an invoice it indicates that payment must be paid within a certain number of days.
Some common net payment terms you might see on an invoice:
- Net 7 Payment to be received 7 days after invoice date.
- Net 10 Payment to be received 10 days after invoice date.
- Net 30 Payment to be received 30 days after invoice date.
- Net 60 Payment to be received 60 days after invoice date.
- Net 90 Payment to be received 90 days after invoice date.
6. 2/10 Net 30
Net 30 means they still need to pay within 30 days of the invoice date but the 2/10 indicates that if they pay within 10 days of invoice date, they will receive a 2 percent discount.
These can vary, for example:
- 1/10 Net 30
- 5/10 Net 30
- 2/30 Net 60
I think you get the picture.
7. COD – Cash on delivery
This one is simple – the customer must make payment for goods or services at the time of delivery. If you were paying attention to number 3 then you may be wondering how this differs from upon delivery- the honest answer is there really is no difference! You’ll see them both used interchangeably.
8. CND – Cash next delivery
This term found on the invoice indicates that the current order/shipment must be paid for before the next is to be delivered. This is most used when there is a standing order of weekly, monthly or quarterly shipments.
9. 21 MFI – 21st of the month following invoice
Another simple one once you know what the acronym stands for: you are expected to pay on the 21st of the month following the invoice date (or any other date stipulated in the coding).
10. CBS- Cash before shipment
By this point, it’s most likely that you CBA with these acronyms, but here we are talking about CBS instead. In this case, the vendor will accept payment before any goods or services are supplied. This term can be used with a custom order.
The acronym filled world of accounts and invoices isn’t easy to navigate, especially if you’re new to the game, so we hope this refresher is beneficial.
Are there any we’ve missed? Leave us a comment over on our LinkedIn page- we’d love to hear from you!
It’s not just understanding understanding the lingo that can be a struggle- are you sick of processing paper invoices? Is manual invoice processing taking up too much of your valuable working time?
Compleat could have the solution for you.