Industry sector:

Organic farm: Cash from debtors

You are likely to have account customers who you invoice at regular intervals. If you're looking to sell your produce through supermarkets, rather than dealing directly with them (or with the large processors that supply to them), you're strongly advised by organic control bodies like the Soil Association to join a producer group or co-operative to gain more bargaining power. Producer groups' and co-operatives' contract terms vary but it would be usual for you to sell your produce to the group and then the group to pay you 21-28 days later.

Other account customers may include fruit and vegetable wholesalers, local retailers and catering establishments. After account customers have been sent an invoice, but before they pay, they are your debtors. When they pay you, the payment is referred to as 'Cash from debtors'.

Payment terms

You will have agreed with your customers your payment terms. Ideally, you would want to be paid immediately but many of your trade customers will impose payment terms as a contract condition. As a general rule of thumb, the larger the concern buying your produce from you, the longer credit period they will expect and the less control you'll have over setting it.

Early settlement discounts

If you offer account facilities to local retailers and hospitality businesses, you might decide to offer them a small discount for early payment. This can help to bring the money in more quickly.

Consider what steps you will take to recover any overdue amounts and whether you will charge interest on these. Don't go on supplying customers who do not pay their bills.

You should make an estimate of the income you might receive from account customers and enter that amount in the month in which the money will be received.

Your business stationery

You should ask your local printers to produce some invoices for you for your trade customers. They will be able to advise you on layout and style. You must have your VAT registration number on your invoices if you are registered for VAT.