Supplier Payment Terms

Supplier Payment Terms

Payment terms define when and how you are expected to pay suppliers for your purchases. Setting appropriate payment terms helps manage cash flow and establishes clear expectations with suppliers. This guide explains how to configure and use payment terms in EquiBillBook.

What are Payment Terms?

Payment terms specify the time period and conditions under which you must pay suppliers for purchases. Common examples include:

• Due on Receipt: Payment due immediately
• Net 15: Payment due within 15 days
• Net 30: Payment due within 30 days
• Net 60: Payment due within 60 days
• End of Month (EOM): Payment due at the end of the month
• 2/10 Net 30: 2% discount if paid within 10 days, otherwise net 30 days

Why Set Payment Terms?

• Cash Flow Management: Plan when payments will be made
• Clear Expectations: Set clear payment expectations with suppliers
• Automated Calculations: System automatically calculates due dates
• Reporting: Generate reports based on payment terms and due dates
• Payment Planning: Plan payments based on due dates

Setting Up Payment Terms

Before assigning payment terms to suppliers, you need to set up payment terms in the system:

1. Navigate to Settings → Purchase Settings → Payment Terms
2. Click "Create New" or "Add Payment Term"
3. Enter the Payment Term Name (e.g., "Net 30", "Due on Receipt")
4. Configure the payment term details (days, discount, etc.)
5. Save the payment term

Note: Payment terms are typically set up once by administrators and then assigned to suppliers.

Assigning Payment Terms to Suppliers

You can assign payment terms to suppliers in several ways:

Method 1: While Creating a Supplier

1. Go to Suppliers → Add Supplier
2. In the Financial Settings section, find "Payment Terms"
3. Select the appropriate payment term from the dropdown
4. Save the supplier

Method 2: Editing Existing Suppliers

1. Go to Suppliers → Supplier List
2. Find and edit the supplier
3. Update the Payment Terms field
4. Save the changes

Method 3: Default Payment Terms

• You can set a default payment term in purchase settings
• This will be automatically assigned to new suppliers if not specified
• You can override the default for specific suppliers

How Payment Terms Work

When you create a purchase bill with a supplier that has payment terms assigned:

• The system calculates the Due Date based on the payment terms
• For example, if payment terms are "Net 30" and bill date is January 1st, due date will be January 31st
• The due date appears on the purchase bill and in supplier statements
• Overdue bills are identified based on due dates

Common Payment Term Types

Immediate Payment

• Due on Receipt: Payment expected immediately
• Common for cash purchases or urgent orders

Net Terms

• Net 15, Net 30, Net 60: Payment due within specified days
• Most common type of payment terms
• Net 30 (payment due in 30 days) is very common

End of Month

• EOM: Payment due at the end of the month
• Useful for recurring business relationships

Discount Terms

• 2/10 Net 30: 2% discount if paid within 10 days, otherwise net 30
• Encourages early payment and can save money

Payment Terms and Purchase Bills

Payment terms affect purchase bills in several ways:

• Due Date Calculation: Due date is automatically calculated
• Bill Display: Payment terms and due date appear on purchase bills
• Overdue Tracking: System tracks overdue bills based on due dates
• Payment Planning: Plan payments based on due dates

Payment Terms Best Practices

• Negotiate Terms: Negotiate favorable payment terms with suppliers
• Cash Flow Alignment: Set terms that align with your cash flow requirements
• Supplier Relationships: Adjust terms based on supplier relationship and importance
• Early Payment Discounts: Take advantage of early payment discounts when possible
• Consistency: Use consistent terms for similar supplier types
• Document Agreements: Document payment term agreements with suppliers

Updating Payment Terms

You may need to update payment terms when:

• Supplier payment behavior changes
• Business relationship evolves
• Cash flow requirements change
• New agreements are negotiated

Note: Changing payment terms for existing suppliers will apply to new bills. Existing bills retain their original due dates.

Payment Terms Reports

Use payment terms in various reports:

• Aging Reports: Analyze outstanding balances by payment terms
• Due Date Reports: View bills grouped by due dates
• Payment Planning: Plan payments based on due dates

Related Topics

• Creating Suppliers
• Supplier Credit Limits
• Supplier Payments
• Accounts Payable Reports
• Payment Planning