Payment terms

dahamsta

Silly question really, I was under the impression that payments terms of 30 days meant, well, 30 days. However a client has just told me that the invoice I issued to them on the 9th of October isn't due for payment until the 30th of November. Is this a standard business practice or are they chancing their arm?

This is a good customer and I'm not actually bothered since a cheque is on the way, I'm just curious to know for future reference. If it's a standard practise, then I'm assuming the best time to invoice is towards the end of the month?

Thanks,
adam

Sleipnir

You'd think that 30 days would mean, well, 30 days. You'd be right too!

30 Days from the day of invoice. not from when they recieved the invoice, or processed the invoice, or put all the invoice in a hat and pulled a random one out to pay it.

The best time for a company to pay an invoice is whenever that company has money.
They don't get money from their customers on the 30th of every month, they get it 30 days after they've issued the invoice.

Borzoi

In my place it's thirty days from the end of the month for our customers.
ie if a part is purchased mid month, they are invoice at the endof the month and then have thirty days to pay. BTW this is very much the 'theory'

As a supplier you have the right to dictate terms of payment (within reason) and should be agreed before goods/services are exchanged. Again in my own place, some suppliers give 30days credit, some up to 90days, depends on the sdcale of business and the length of the relationship.

In your case if you have no formal agrrement on terms what you could do on future quotations is to outline that they've 30days credit from date of invoice (or whatever) so that in future when they say they wont pay for over 45 days you do have a leg to stand in. But in the end all you can do is huff and puff, unless you're prepared to ruin your good business relationship

Our man in Havana

Can you not start to charge interest once the 30 days are up? The Cash and Carry I deal with charges 7% over the current ECB rates.

spongebob

Originally posted by Bond-James Bond
Can you not start to charge interest once the 30 days are up?

Yes you may, it is the law for the past year or two. ISTR you must state the interest rate on the invoice where it sez terms 30 days.

Many companies only do a chq run on the last day of the month, I recommend they be flagged for invoicing early to shorten the payment interval .... eg when you <cough> ship the goods, or backorder them .

M

De Rebel

Originally posted by dahamsta
the invoice I issued to them on the 9th of October isn't due for payment until the 30th of November. Is this a standard business practice or are they chancing their arm?

Its not an unknown business practice. It became the convention in the retail/distribution sector here in the late 80s/early90s when a large number of distributors ganged up on a well known irish owned supermarket operator and demanded an end to the practivce of taking forever and a day to pay invoices. The Government (i forget which department) got involved. The outcome was pressure on the aforementioned retailer to pay its clients in accordance with the pre agreed terms of business. Most terms of business stated 30 days from date of invoice. Said retailer protested that in the case of its larger suppliers and perishable goods suppliers, this would mean raising a cheque every working day, and that this was impractical. The compromise was that payment would be made 30 day from the last day of the month in which the invoice was raised, which is what you are being quoted.

In practice, this is reasonable, most companies preferring to do one creditor payments run at the end of the month.

spongebob

Originally posted by De Rebel
A well known irish owned supermarket operator and demanded an end to the practivce of taking forever and a day to pay invoices. .

There was an Urban myth about then (it could not have been anything else could it) that Dunnes Stores made a large % of their profit from banking supplier payments and paying them late while earning interest in the bank at 5-10% instead.

They were not the worst, a Salesman I know was almost fired for simply cutting a deal to sell a load of furniture to (ISTR) Kildare County Council. While Local authorities were generally bad in the 1980's when it came to paying their bills on time it seemsKildare were absolutely legendary back then among County Councils . His company would have gone to the wall had the sale and delivery gone through but the boss kyboshed it.

M

De Rebel

Originally posted by Muck
There was an Urban myth about then (it could not have been anything else could it) that Dunnes Stores made a large % of their profit from banking supplier payments and paying them late while earning interest in the bank at 5-10% instead.

Ben Dunne snr. is reputed to have said on more than one occasion "I make my money from Banking, not from Drapery and Grocery". That’s probably where the story started. Certainly in his time when 99.9% of Dunnes lodgements were cash Dunnes did well on the interest received, as the cash was in the bank for considerable periods before paying the suppliers.

There were also tales of payments for large deliveries being held up while disputes over trivial credit notes were being resolved.

Dunnes certainly changed in the mid 90s, apparently becoming much more vendor friendly. There were still strange practices, such as rounding payments down to the nearest 5 pound multiple.

Speaking of the past, does anybody remember the social annihilation that resulted from producing a credit card at a Dunnes Stores checkout in the 80s and the queues that formed while they spent 15mins looking for the Visa machine, or the 15 mins while the supervisor was hunted down to sign the back of your cheque !

spongebob

Originally posted by De Rebel
Dunnes certainly changed in the mid 90s, apparently becoming much more vendor friendly. There were still strange practices, such as rounding payments down to the nearest 5 pound multiple.

True, not before a factory in Athlone shut down c 1995 because of their late payments though. They are supposed to be a lot better nowadays, to their suppliers and staff too.

Speaking of the past, does anybody remember the social annihilation that resulted from producing a credit card at a Dunnes Stores checkout in the 80s and the queues that formed while they spent 15mins looking for the Visa machine, or the 15 mins while the supervisor was hunted down to sign the back of your cheque !

Most of us did not have a CC in the 80's head. Anybody who had a CC in Ireland in the 80's wasn't there so to speak.

M

Specky

Different companies operate different terms. There is a difference however between "30 days" and "30 days, end of month".

Which one you operate should be stated in your terms and conditions of sale (...you don't have terms and conditions??? Get them quick...if you can't make them up yourself borrow somebody elses and copy them, making any adjustments as necessary).

You find more companies wanting to operate "30 days end of month" now because it's simply more convenient to only do one cheque run per month rather than (potentially) having to do one every day. Time it right and you get almost 60 days!

dahamsta

My invoices clearly say "30 Days", I just assumed I'd be paid in 30 days. However this is a subsidiary of a big building contractor so I can understand why they'd want to cut cheques in one go.

Thanks for the help folks.

adam

Victor

Originally posted by dahamsta
My invoices clearly say "30 Days", I just assumed I'd be paid in 30 days. However this is a subsidiary of a big building contractor so I can understand why they'd want to cut cheques in one go.

Builders will screw anyone they can. They tend to get their money 21 days after the end of month (may not be a calendar month).

I used to do some work for a medium size contractor - he would pay everyone on the Thursday before the payment was due. Or the Thursday after they started screaming. /me writes self note to start screaming.

Builder's suppliers tend to give 30 or 60 days from end of month.

Try to issue your invoices around the 20th of the month.

Specky

Nearly all of our business is done with electrical contractors, building companies and the like. The whole of the building industry continues to be a pain in the backside when it comes to getting paid.

I think I spend more time arguing with people on this "we can't pay you because we haven't been paid yet" business than anything else.

I have a pretty good credit management company handling late payers now and they seem to do the trick pretty well. I've tried the invoice discounting and factoring routes and both are expensive and not that effective (especially on low margin jobs) but I just pay the credit management people a fixed fee and they pi$$ off our tardy customer's accounts departments so much that they just seem to pay up.