Commercial Account Payment Terms

Why this matters

Commercial accounts feel like a step up: bigger jobs, repeat work, a steady name on the books. They are also where small shops quietly go broke, because commercial customers expect to pay on terms, not on completion. You finish the work, send the invoice, and then wait while they run it through accounts payable. Set those terms loosely and you become the property manager's interest-free lender.

Terms are a credit decision, not a formality

When you agree to net terms, you are extending credit. "Net 30" means the full amount is due thirty days after the invoice date; "net 15" is fifteen days. The customer takes your work now and pays later, and in between you carry the cost of labor and material you already spent.

Treat the request for terms the way a lender treats a loan application. The fact that a company is large or well known does not mean it pays fast or pays at all. Large outfits are often the slowest, because their size gives them leverage and their process is built to hold cash as long as possible.

Vet before you extend

Before you put a new commercial account on terms, do the basic homework.

• Get a signed credit application with the legal business name, billing contact, and a tax ID.
• Ask for trade references, other vendors who can tell you whether this account pays on time.
• Start small. Put the first job or two on a deposit or on completion before you open a line of credit.
• Confirm exactly who approves invoices and how they must be submitted, because the wrong format or a missing purchase-order number is a common stall.

A few minutes of vetting separates the accounts that pay from the ones that will train you to chase them.

Put the terms in writing, every time

Verbal terms are the first thing forgotten when a check is late. Your agreement should state, in writing the customer signed:

• The payment window (net 15, net 30, whatever you agreed) and the start date (usually invoice date, sometimes delivery date).
• A late fee or finance charge on past-due balances, stated as a rate, where your state allows it.
• A deposit or progress-billing schedule on larger jobs so you are never fully exposed.
• What happens on non-payment: work stops, the account goes back to prepay, the balance goes to collections.

Terms you can point to in a signed document are terms you can enforce. Terms you only discussed are wishes.

Match the structure to the risk

The point is to never carry more exposure on one account than you can afford to lose, and to keep the riskiest customers on the tightest leash.

Invoice fast and chase on a schedule

The clock does not start until the invoice goes out, so bill the day the work is done, not at month-end. Then run a standard follow-up cadence instead of waiting for the customer to remember.

• Invoice immediately, addressed to the right contact, with their PO number and your terms printed on it.
• A friendly reminder a few days before the due date.
• A firmer notice the day it goes past due.
• An escalation to a decision-maker, not just AP, once it is meaningfully late.

Consistency is what gets you paid. Accounts pay their squeaky vendors first and their quiet ones last.

Know when to cut a slow account loose

A commercial account that consistently pays late is costing you more than the revenue is worth once you count the cash you front and the time you spend chasing. Put a chronic slow-payer back on prepay terms, or stop taking their work. Volume that does not pay on time is not a customer, it is a liability with a logo.

References

• SBA guidance on extending trade credit and managing accounts receivable
• IRS rules on accrual accounting and recognizing receivables as income
• State usury and finance-charge limits on commercial past-due balances
• See related: Getting Paid Faster: The Systems That Help; Setting Payment Expectations Up Front