Payment Terms

Payment Terms 45EOM

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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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RLI
By lionofludesch
05th Dec 2018 08:36

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" ?

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Replying to lionofludesch:
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By Sarah Fawcett
05th Dec 2018 08:41

Wow!!! Well that's me told!

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Replying to Sarah Fawcett:
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By WhichTyler
05th Dec 2018 08:45

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'...

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Replying to WhichTyler:
RLI
By lionofludesch
05th Dec 2018 08:53

WhichTyler wrote:

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.

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By frankfx
05th Dec 2018 09:38

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

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By Sandnickel
05th Dec 2018 09:57

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.

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Replying to Sandnickel:
RLI
By lionofludesch
05th Dec 2018 11:06

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.

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Replying to lionofludesch:
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By andy.partridge
06th Dec 2018 12:20

Isn't that 60 days?

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Replying to andy.partridge:
RLI
By lionofludesch
06th Dec 2018 12:37

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.

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Replying to lionofludesch:
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By Sarah Fawcett
06th Dec 2018 13:28

If only life was that simple! Unfortunately we cannot bill until works are complete and that cannot be predicted nor manipulated in our industry.

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By Manchester_man
05th Dec 2018 10:05

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!

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Replying to Manchester_man:
RLI
By lionofludesch
05th Dec 2018 11:39

Manchester_man wrote:

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.

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By frankfx
05th Dec 2018 10:31

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?

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Replying to frankfx:
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By Sarah Fawcett
05th Dec 2018 10:52

Well, they are a major blue chip company in the energy field, so I'm not worried about their ability to pay, it just became a bit of a point of principal for me. We have always traded against these terms, and in fact the customer has generally paid early, but for some reason they have now come up with their interpretation of terms and are now going to pay the next 3 due invoices late, and it made me question myself.
Thanks for your thoughts.

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Replying to Sarah Fawcett:
Red Leader
By Red Leader
05th Dec 2018 10:57

principle.

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Replying to Red Leader:
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By Sarah Fawcett
05th Dec 2018 11:28

Red Leader wrote:

principle.

I hadn't realised this was a grammar forum, thank you for pointing out my grammatical error!

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Red Leader
By Red Leader
05th Dec 2018 12:14

It's not a spelling forum either. Alright, I'll stop now.

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Replying to Sarah Fawcett:
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By kevin503
06th Dec 2018 10:41

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.

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By Sarah Fawcett
06th Dec 2018 10:55

Ain't that the truth!

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By PChapman
06th Dec 2018 11:42

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

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Replying to PChapman:
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By Brend201
12th Dec 2018 13:22

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.

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By Alf
07th Dec 2018 09:13

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.

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By frankfx
12th Dec 2018 14:55

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

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