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Payment terms 'should be agreed at the outset'

NewsMatthew Garrow-Fisher, Head of ResearchContent Plus30.04.2012 Comments (1)


From late payments to technology complications, there are many things that can disrupt the supplier-buyer relationships and cause problems for both parties. That's why agreeing payment terms up front before any contracts are signed and the purchase-to-pay…

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late payments, electronic invoicing, einvoicing, e-invoicing, procure to pay, purchase to pay, P2P

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Benmeridja Benmerdija GIS International 03.05.2012

As CEO of a service company in Source-to-Pay, I totally agree with these remarks. In fact the main issue is related to the impact on the cash-flow. Payment terms, as well on Sales- as on Purchase side, have to be discussed upfront the contract. As long as there’s a balance between both (DSO versus DPO) the company can report a positive or neutral result. But in today’s financial instability on the global market, we all are facing global pressure of the major corporate companies for standard longer payment terms. And on the other hand, Suppliers are claiming to get their money earlier on the bank. Both mechanics result in negative cash-flow, putting Customer-Supplier at serious risks.

It’s clear that the current bank restrictions in credit facilities are tried to be compensated by longer payment terms. This is shifting the problem towards Supplier or Provider without any solution within the supply chain.
Marc