Shipping terms

Shipping terms define who pays and when. These decisions affect your cash flow.

• FOB buyer means that the shipping is free-on-board to the buyer and that the seller pays.
• FOB seller means the buyer pays.

Shipping terms can be

• part of the negotiation for each order
• based on terms your competitors use
• based on terms that are most common in your industry.

Some businesses require that customers pay for products at the time of the order. This is most typical for customized products and services. Alternatively, customers can pay

• upon receipt of goods
• cash on delivery (COD) for delivered goods
• 30 days from time of delivery (net 30), and
• 60 days from time of delivery (net 60).

You should agree to shipping terms in writing before an order is processed.

Computer accounting programs and electronic payment options help with efficient processing of orders, receipts, and payments. The level of technology you need for shipping operations usually depends on industry norms and your business size.