Credit terms are the conditions under which a seller extends credit to a buyer, specifying when payment is due and any discounts for early payment.
Credit terms define the payment expectations between buyer and seller. Standard credit terms include: COD (Cash on Delivery), net 7/14/30/60 (payment due in the specified number of days), EOM (End of Month - due at the end of the month following the invoice date) and early payment discount terms like 2/10 net 30 (2% discount if paid within 10 days, otherwise full amount due in 30 days). Setting appropriate credit terms requires balancing your need for prompt cash collection against your customers' expectations and competitive dynamics in your industry. You may offer different terms to different customers based on their creditworthiness, order size and payment history. Credit terms should be clearly stated on every invoice. In Xero, default credit terms can be set per customer. SortBooks monitors actual payment patterns against stated terms, helping you identify customers who consistently exceed their credit terms.
SortBooks helps with the bookkeeping behind credit terms by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing credit terms by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
Payment terms specify when payment is expected from a customer. Common terms include payment on receipt, net 7, net 14 and net 30 (meaning payment due within that many days).
Accounts receivable (AR) is the money owed to your business by customers who have purchased goods or services on credit. It is a current asset on your balance sheet.
Cash flow is the movement of money in and out of your business. Positive cash flow means more money coming in than going out. It is often considered more important than profit for business survival.
An ageing report categorises accounts receivable or accounts payable by the length of time invoices have been outstanding, typically in 30-day buckets (current, 30, 60, 90+ days).
An invoice is a document sent to a customer requesting payment for goods or services provided. It includes details of the transaction, payment terms and the amount due.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.