Supplier Payment Terms

crispy

Hello,

Don't know if anyone can provide any advise.

Company I work for has a supplier who are stating that we have a 30 Day credit account with them, however are they are then issuing VAT Invoices (Not Proforma's) at the time of receiving our Purchase Order and not on despatch of goods. I believe that they should not be doing this, and the invoices they are issuing arer actually just Proforma's - Im not sure either as to the VAT Tax point as at the time of the order no payment has been issued and no goods have been received.

Any feedback appreciated - Thank you

PGM

Transaction date can be tricky one to judge. If they have allocated the stock etc for you, and its there ready and waiting for delivery/collection, then I think you can argue the tax point stands.

crispy

Thank you for your response.

On my experience in working in accounts, the actual purchase VAT invoices are authorised / posted to the ledger on receipt of goods / completion of service. I just don't see why their 30 Day invoice should be recognised where nothing has been received or paid.

Rinske

Working in purchase ledger, I let it depend on the goods.
We usually keep the invoice date as tax date, but we don't pay until the goods have been received (unless a supplier is stock holding for us).
The terms are based on the invoice date, and there are quite a few suppliers where we get the invoice before the goods. The goods just won't get paid if not delivered and we just keep the invoice on hold, until satisfied it has all been delivered, or proper credit notes have been received.

PGM

Yeah thats the major issue, I don't really care when the VAT date is as much as when they want their money.

30 days should be 30 days!

We pay all suppliers 30 days from the end of the month. Or else you'd end up doing cheque run most days?!

crispy

Thank you,

This supplier is issuing a 30 Day proper VAT Invoice on the date of receiving our Order - and then requesting payment before the goods are actually despatched. This is the reason for querying the vaildity of their VAT invoice, in my experinece the purchase ledger system has worked as Rinske has explained.

I have this company's credit control chasing me for payment, it just seems sneaky for them to say 'yes - you have a 30 Day account with us' and then 'Oh - we actually issue invoices on receipt of your Order and the goods aren't released until receipt of payment'. To me, this does not sound like a credit account. I also wonder in their financial accounts whether they are declaring Turover for goods not delivered / no paymemts received.

Rinske

We do pay proforma's if we got the request from our department and not from their department. We always check, if the departments are happy to pay, we pay, otherwise we won't pay in advance.

It does sound more like proforma payments, rather than a credit account to me.

@PGM we do a weekly payment run and a month end's payment run. It strongly depend on what has been agreed with the supplier to what terms we use and to keep it going smooth we do weekly payment runs.

crispy

Thanks again Rinske - this is exactly how our company works in regards to advance payments. Will ask the buyer to be careful in future when sending orders to this annoying supplier.

Rinske

We do the same sometimes although not too often.
We politely suggested at some point to swap a supplier after I was being yelled and cursed at twice over the phone, because he hadn't received his payment yet, which was on hold waiting for delivery!

We didn't swap suppliers, but the buyer threatened to take our business elsewhere and that was enough to get him to be polite and a bit more patient.

The funny thing with suppliers is, some are absolutely used at us paying in time and have no issues at all, I have never spoken to them personally, up until the recession started where more and more suppliers started calling to check if we received invoices/ when they would be paid and how they would be paid, while we've been paying them in time at the same dates for the past years.
I wonder if your supplier is doing this for the same reasons, either because they got cash flow issues or don't trust the company yet or something similar?

crispy

Yes - this is exactly the case. The supplier contacts us to acknowledge receipt of Invoice, then whether it has been authorised and then again when the payment due date is closing. We have traded with this company for a number of years with no record of late payments which adds to the annoyance.

Out of curiosity, how did your situation resolve, did you only pay after receipt of goods, and was the trade on credit terms ? I don't see why we should process a bill when we have received nothing in return.

Rinske

It was a supplier who said the payment date was the invoice date, so basically 0 days.

This was something we never liked, as we always ended up with a late payment.

In the situation where he was yelling and cursing at me, I told him to talk to the purchaser, as we didn't have the goods yet, so he spoke to her and she forwarded his complaint to the director. The director asked me about it and I explained the situation and that if it was up to purchase ledger, it would be better to swap over to a different supplier.

Our director called him back, explained the situation and told him that if he can't settle on different terms, we will swap to a different supplier. That changed his mind and now we got them on 30 days terms.

However in most cases, we just won't pay if it hasn't been delivered yet (with exceptions of course for proforma's etc).

In the end, the suppliers can yell at me all they want, but it doesn't get the payment done any quicker. (Doesn't happen to often luckily)

blobbyh

My take on this is it often depends on whether the invoice is for tangible goods or non-tangible services.

With the former, I'd invoice as soon as the goods are in stock and available for supply or despatch with transit time not affecting the tax date. If you despatch today then invoice today even if the customer doesn't get them until next week. Of course he won't pay until he gets them but that's why you're offering offer credit terms anyway, allowing for receipt of goods date long before payment date. As for 'pro-forma invoicing with a proper tax date' - which is effectively what crispy has described - those who have experienced factoring will know this is strictly forbidden by the lending companies. As we know, all pro-formas should state "This is not a tax invoice" to be perfectly clear.

With services, again it's usually at the point of delivery of service unless otherwise agreed. As a recruitment company, for a client search we invoice an upfront, a shortlist and a placement fee. The upfront is effectively a client commitment/retainer fee while the shortlist and placement are both invoced once that particular stage has been reached. A placement is only invoiced once the candidate has actually started - e.g. July - rather than when they were placed - e.g. May - though some may prefer to invoice at the earlier date as that was when the service was technically done.

crispy

Hello,

The supplier is offering a 30 Day Account, and then issuing an invoice dated on receipt of our Purchase Order - the delivery lead time on this item is actually 2 months - which to me completely defeats the object of credit. We will end up paying for the goods a month before receivng them, and will then have to wait at least another month for our subsequent sales invoice to be paid - we raise and date our 30 Days sales invoices on despatch of goods.

blobbyh

Hmmmm... could they be 'Invoice Discounting' since they're so eager to collect their money before it's technically due? Similar to factoring only they retain control over their purchase ledger and are thus more able to cover up tax date irregularities from the noses of their lender.

snowmarauder

After reading a couple of posts and scanning the rest and in my opinion. I recommend you firstly do a web check search on the company who is supplying you and see if there books are all up to date. Secondly, check there terms and conditions and see if your company signed them and returned them. Has this company got more insistant on your payment before despatch very quickly over a short period of time. I would definately be looking for alarm bells, as in my experience of running a small partnership, over the last 10 years, this company seems to have cash flow problems, or has had problems in the past and they have no credit terms of their own. Research their reputation, all you have to do is google them, look in the Gazette, google the directors, look for company name changes, see if you can find out who supplies them, who their other customers are. But, do not ever pay for goods that have not been received, and I know what I would tell them about their proforma invoice. Write a nice letter to their managing and finance director and ask why you are receiving pro formas as you understand you have a 30 days net policy with them. Which means, delivered on the 1 of jan is day of invoice, Pay by 28 feb. Be nice and ask for their prompt reply, even better email them all, its amazing what response you get, whilst doing this, get your buyer to research for a new supplier, oh I forgot, also put, if they answer saying proforma is their policy and they are sticking to it, say well we want a discount for paying within 30 days net, one for paying cod and one for paying on proforma, because if you are paying like this, everyone will want your business and would fall over backwards to give you a cash discount.

mark057

A little naughty of your supplier to issue their invoice at the time the purchase order is received but I've seen it done in my own experiences.

My understanding is a basic tax point is created when you either receive the goods or pick them up. The basic tax point becomes the date your supplier will have to account for the VAT.

If you supplier sends an invoice (dated) or receives payment, whichever comes first, before the basic tax point then that becomes the actual tax point, which supersedes the basic tax point.

If the supplier issues an invoice within 14 days of the basic tax point then the date of that invoice becomes the tax point.

Hope that helps?

Mark

Marga

my two cents

you place an order onto this company for a lets say first thing that comes to mind a chair...

your Purchase order should say how many dates are the payment terms...the invoice should match this


the chair is in the warehouse ready to leave , the courier comes to pick up the chair to have it delivered ...the invoice then is raised ....from that they then you should have 30 days to pay the invoice (if the payment terms are 30 days). The supplier might call you to check that evertything is ok with the invoice and that it would get paid on time but you still have your 30 days...

IF something is wrong with the order you have placed, ie one leg of the chair is broken, the chair never arrived, you ordered a blue one and a brown one arrived, etc then you are entitled not to pay the invoice as the goods supplied are not as you requested.


for example in my company we always raise invoices when kit has been despatched from our warehouse... however most of our customers do not pass payment until the end user has not completed a GRN goods received note ...one of my tasks is to call customers to ensure that they do this within the 30 days so inv can be paid on time

hope that helps

PGM

I'd ask for a delivery date before placing the order?

Make them commit to delivering the good soon after you place the order.