Payment Terms

Payment terms are more than just dates on an invoice! 💵 And they are crucial in the negotiations phas

They significantly impact cash flow, supplier relationships, and overall business success.
Why?

✅ For Buyers:

Optimize cash flow: Leverage terms like 2/10 Net 30 to incentivize early payments and improve cash position.

Negotiate strategically: Explore options like milestone payments or consignment to align payments with project progress and reduce risk.

Build strong supplier relationships: Fair and timely payments foster trust and encourage long-term partnerships.

✅ For Suppliers:

Ensure steady cash flow: Prompt payments are crucial for meeting financial obligations and investing in growth.

Reduce risk of non-payment: Clear payment terms minimize uncertainty and protect your financial stability.

✅ Key Takeaways:

1️⃣ Cash in Advance: Strongest for buyers, riskiest for suppliers.
Example: High-risk international orders, custom-made goods, new or unproven suppliers.

2️⃣ Cash on Delivery (COD): Improved cash flow for buyers, reduces risk for suppliers.
Example: Small, low-value orders, deliveries to remote locations, high-risk industries.

3️⃣ Net 30: A common and balanced approach.
Example: Most B2B transactions, established supplier relationships, standard for many industries.

4️⃣ Net 60: Offers more flexibility for buyers, but delays cash flow for suppliers. Example: Large construction projects, seasonal businesses, projects with extended timelines.

5️⃣ Net 90: Significant delay in cash flow for suppliers, often used for very large or complex projects.
Example: Large construction projects, long-term supply agreements in certain industries.

6️⃣ 2/10 Net 30: Encourages early payment, improves buyer’s cash position.

Example: Common in many industries, especially for smaller orders.

7️⃣ Milestone Payments: Aligns payments with project progress, reduces risk.

Example: Large construction projects, software development projects, complex multi-phase projects.

8️⃣ Consignment: Reduces inventory costs for buyers, but increases risk for suppliers.
Example: High-value or perishable goods, specialized equipment.

See below full information on PT and let me know what we need to add?
What are your preferred payment terms as a buyer or supplier? Why?