Payment Terms
- Thread starter wesward
- Start date
Standard is generally 30 days and quick pay can vary deduction wise depending on days request 2 days, 3 days, 5 days, 7 days
Though net 30 days is pretty standard, you should be aware that invoices are paid in 45-60 days on average across the industry. The creates a cashflow management challenge for many - especially those growing quickly. Make sure you are well-capitalized and check out all your options including banks, leasing and factoring companies.
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I would agree with that assessment. Although you may ask for and want payment within 30 days, the norm will be 45 to 60. I personally prefer to stay away from anyone who regularly goes over 60 days to pay me.
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This “30 day” thing is so misleading. When does the clock start? When your billing clerk hits the print button on their computer? When you drop it into the nearest Canada Post mailbox? When you see it being scanned to your customer? Realistically the clock can’t start until you know for sure that your customer has it in their hands. Nobody, not even the worlds best payer, will start their payment process until they have the invoice. That is why you will see the words “upon receipt of invoice” included on almost everyone’s payment terms. Once your invoice has been received it is perfect acceptable to start the clock and expect to see payment on or about 30 days later, keeping in mind that virtually no one (especially large companies) issues payable cheques on a daily basis. In my opinion, if someone says they will pay in 45 days, or even 60 days and they do exactly that, they are a more reputable customer than the one who claims to pay in 30 days and then lies to you as they stretch it out to 60+.
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" 30 days net" is meant to be payment from the date the work is undertaken. So if I hire carrier A to pickup on March 14, then the payment clock starts ticking on March 14. That's how I figure my customers' days to pay, and that's also how I look at my days to pay for the carriers I hire. Now, of course, the drawback is that if you have a carrier who invoices slowly then that's going to impact your days to pay.. That's one reason I hound my carriers for the invoice and where in some cases I'll mail out a check without an invoice, referencing only a p/u number (provided that I'm able to independently confirm that load delivery was completed without issues).
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Absolutely sir... Good points all around.
I scan all of my invoices and email them out ( with a few exceptions for the dinosaurs ) and I pay my invoices by EFT ( again, except for the dinosaurs )...
I know exactly when any invoices or payments I send out are received.
For the record, I start counting the day I send the invoice by email and I stop counting when the cheque is received in my office or the EFT payment is received in my account.
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Very nice for you freightbroker, certainly an exception to the rule. There is no way in this world that my firm would ever consider paying an invoice that we have not yet received. I also would never consider the pick up of a shipment as the start of the 30 days to pay. We issue cheques every Thursday. Any invoices we received 30 days prior to that, gets paid that Thursday. If it was received on the Friday 30 days prior, it gets paid the next Thursday. We accept mailed invoices, hand delivered invoices, faxed invoices, emailed invoices and delivery by carrier pigeon. If you want to be paid in 30 days, the onus is on the supplier to get his invoice out promptly.
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My interest in prompt payments is self serving.. I care deeply about my days to pay as it is one of few differentiators among the thousands of brokers and carriers out there. I have no problem paying for a load sans invoice from carrier provided I have proof the load delivered. In some cases that's easier to get than an invoice from the carrier! I generally send checks out on the day I receive the invoice/day I confirm load delivery by some other means.. I usually take care of that in the evenings when the phones are not ringing.. so every day is check day around here. Also makes it easier to keep track of things without falling behind. And I would rather pay a little interest on my operating line if I get a good payment record in return.
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The term "net days to pay" in accounting is well defined as days from when the work was commenced... i.e. when load is picked up. That's why I use that day and not when the invoice was received.. Personally I would rather start the clock when I see the invoice, but it ain't up to me.
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Which is exactly why I and everyone else should avoid “net thirty” payment terms. If that terminology appears on a carriers contract or credit application, scratch it out and replace it with “payment will be made 30 days from receipt of invoice”. When it comes to payments, it is up to me, because I sign the check. If a carrier, or any other supplier is too lazy or disorganized to get their invoicing out in a timely manner, I for one, will not reward them by issuing payment before 30 days has expired. Freightbroker, perhaps if you paid your carriers on a regular thirty day schedule, as opposed to your expedited system, you might not need the bank operating line. To each their own, but the less I need the bank the better.
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I know what you're saying, but at the end of the day THEY report my days to pay..I would much rather save the bank interest too.. but I do get something in return.. my advertised days 2 pay which, admittedly, may not be worth as much as I sometimes think it is. We work in an industry where all carriers and brokers are more or less the same, with no discernable real difference among us. So... I figure days to pay is one area where I can at least skew things marginally in my favor.. It's something I have control over (one of the very few things).. however small it may be..
@Johnny-chicken, you could always take those slower paying loads and factor them, if they are priced so you could cover your factoring costs and still make decent margin. Just sayin'....