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      05-19-2012, 05:40 PM   #1
templarklimek
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business advice please

Gents,

I've got a great customer who brought up the idea of them prepaying invoices for 6-12 months rather than monthly billing. I was asked what kind of discount I would offer if doing so.

It would be helpful for cash flow for me. And I researched it some and was thinking 6-10 percent would be good for both parties.

Any thoughts from anyone in the business community on this subject would be great. Thank you.
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      05-19-2012, 08:05 PM   #2
TotalPower
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depends on many factors...how much you need cash flow? Can do without the extra income? consider a loan would be at least 5% so if you can do 5% discount then you're even. More than 5% and it's the same a taking a short term loan or a line of credit. Also you need to be careful not to blow the money if you suddenly feel like you have expendable cash.
We usually give our customers up to net 30 terms (orders of 50k+). Most are prepaid(smaller sales). The largest orders(150k +) have 50% up front and 50 percent at 30 days, we give them a 3% discount if they do 100% upfront.
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      05-20-2012, 04:27 PM   #3
templarklimek
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Thank you, I was thinking around 6 percent would be fair. It would be helpful as my larger accounts will take as long as 60 days to pay. But as you said it's not "profit" but a prepayment on an active account.
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      05-27-2012, 12:42 PM   #4
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It really comes down to making a budget, if you were to have the prepayment and consider it cash, would it allow you to operate more relaxed, more stable, pay off debt, etc... It's all about planning and knowing where you are, where you want to be, and how to get there.
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      06-19-2012, 08:57 PM   #5
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My business advice is dont ask for business advice on the internet lol,
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