Good Morning everyone
I wonder if people would give me their understanding of payment terms 45 days end of month? Our interpretation is 45 days after the end of month of invoice so if the invoice was dated 27/11/18 - EOM would be 30/11 then plus 45 days = 14/1/19.
Our customer's interpretation is +45 days then end of month, so in the case of an invoice dated 27/11 that would be +45 days = 11/1/19 then EOM = 31/1/19
I just wondered what either the correct official definition was or alternatively, the majority opinion.
Thanks in advance for your help
Sarah
Replies (23)
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There's no correct official definition of something so vague. It could be either.
The solution is to be more precise in your wording. How hard would it be to say "45 days from the end of the month of invoicing" ?
But don't expect it to change customers' behaviour.
There'll be a lot of ' Well that's nice but we always pay all our bills at the end of the month so we'll just carry on like that', followed by a couple of choruses of ' The rep said that would be fine'...
But don't expect it to change customers' behaviour.
There'll be a lot of ' Well that's nice but we always pay all our bills at the end of the month so we'll just carry on like that', followed by a couple of choruses of ' The rep said that would be fine'...
Quite.
On occasions like this I dip into my well -thumbed management handbook.
Alice's Adventures in Wonderland.
''Then you should say what you mean,” the March Hare went on.
“I do,” Alice hastily replied;
“At least—at least I mean what I say—that's the same thing, you know.”
“Not the same thing a bit!” said the Hatter.
Some how get the parties on the same page.
Then get writing terms and conditions, with the Mad Hatter's advice in mind
I agree with your definition. The reason for these payment terms is generally that all invoices are collated at month end rather than drip fed through the month with different payment terms for each invoice.
The customer is just being belligerent to get minimum 60 day terms out of you.
That's not necessarily true. An invoice dated 1st November would be payable 31st December under the customer's interpretation.
Whether that happens will say much about the customer, of course.
It is.
The customer's interpretation is the end of the month in which the 45 day period ends, so 31st December.
Sarah's interpretation would be that it was due 45 days from the end of November, or 14th January.
The trick is to play the customer's game and bill early in the month.
I agree with the previous comments, however to give you my personal view, i would always read 45EOM to be the end of the month of the date of invoice, plus 45 days.
It's the same with 'Net 30' and 30 days net. People / customers very often misunderstand what such terms mean.
If in doubt, spell it out!
I agree with the previous comments, however to give you my personal view, i would always read 45EOM to be the end of the month of the date of invoice, plus 45 days.
I wouldn't even recognise "45EOM" as payment terms.
I do hope we had a little more than that.
All reasonable people would view it as end of billing month plus 45 days.
Conventional thinking.
We now have an outlier with unconventional thinking, may be this is an indication to avoid trading with such a business.
Red flags are often waved in one's face , and we keep looking around the side !
How good is the business's credit score?
Major blue chip companies love to use suppliers as a source of free credit. They hang on to your money as long as possible as part of their business model.
Blue chip or not - suddenly changing their payment behaviour without good reason is a cause for concern (Corillion!)
Far more so than the 45 day v's 60 day principle
I'd credit check them and consider reducing their payment terms and / or credit limit
I would also be more strict about enforcing the credit limit than payment terms, and credit limit is not as open to interpretation as payable terms
Good luck
I fully agree with this. Reminds me of a customer who had negotiated a 4% settlement discount for payment earlier than the usual terms. Stopped paying early for the 4% and paid to normal terms. Then went bust. So worth looking at their current status.
As far as I recall, from when I worked in businesses selling tangible goods, your customer is right, in that this is the accepted meaning, regardless of grammar or technicalities.
has the major blue chip company breached its own supplier credit terms and principles.
OFTEN SEEN As Part OF Their RESPOSINBILTY CHARTER ……….. the company will have a code of practice on this
Seriously make an enquiry on that very point.
you may have dodgy accounts MANAGER .
I support your point of principle and have won some little victories for my clients over the years., improving their cash flow.
good luck