Payment terms: "Payment will be made within 60 days of the end of the month in which they are received" says an order that's been passed to me for clearance. Those terms look like a return to the bad old days - should we accept them, we'll complete a course in the first few days of June, and invoice that month. The 60 days will start on 1st July, and payment will be cleared into our bank account on or by Monday, 3rd September. The "end of the month" trick adds, in effect, up to a further 30 days until the bill is paid.

Terms such as these, on what's quite a substantial order, used to be quite common. These days, with improved electronic systems they're totally un-necessary as far as company's administrations are concerned, and they represent bully-boy tactics by a huge multinational looking to use their suppliers as cheap bankers by providing them with what is, in effect, three months of interest-free overdraft.

What are our options? We could simply roll over and accept, and put the cost of not having the money for the period down as a "cost of sale". We could look to re-negotiate with the company's system, but what's the chance of their ivory-towered managers allowing more reasonable terms? And if they did on paper, would they really happen? And would it jeopardise future business? How about us requoting at a price that includes an appropriate interest charge?

"The surcharge of 10 pounds may be deduced if you pay within 10 days". So says a footnote on a bill that's also been brought to my attention (for other reasons), and it's tempting - so tempting - to start invoicing companies such as our 90-day friends with such a surcharge. But I fear that it would complicate our systems and administration where we wouldn't know how much to put through the accounts until it actually came in, and I can imagine a lot of confusion and a lot of resentment being caused in our particular line of business. We could set up an alternative "if you want 90 days" price structure, but then so many companies overrun our 28 day terms and need chasing - would we backcharge them? The whole thing is one of those silly nightmares that any business selling to other businesses or on credit faces.

I have no magic wand. No solution. Policy set, decision made, but only the experience of what happens will test the case. At the moment the jury's out.
(written 2007-04-27 07:06:07)

 G502 - Well House Consultants - Business Practise

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This is a page archived from The Horse's Mouth at http://www.wellho.net/horse/ - the diary and writings of Graham Ellis. Every attempt was made to provide current information at the time the page was written, but things do move forward in our business - new software releases, price changes, new techniques. Please check back via our main site for current courses, prices, versions, etc - any mention of a price in "The Horse's Mouth" cannot be taken as an offer to supply at that price.

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