Payment Terms Benefit & Saving

[Zakaria]

Hello All,

i want just to ask a question regarding the real saving cost and benefits to change the payment terms, in my company we are using down payment to obtain Fuel, now I negotiate with the supplier to approve us a 45 days payment terms after invoice receipt instead to pay in advance,and they agree, please I want to know just how to calculate the saving cost .
knowing that we are paying $ 65.000 /Month excluding transport.

i appreciate your help .

 

[Corzhens]

I don’t have an actual experience with the savings on cost regarding terms of payment in the logistics but I had the experience when we had the retail business. I was actually on the other side of the fence and our customers were given 60 days terms with no down payment. It was a losing proposition but there were too many competition so we had to give in just to get clients. But unfortunately some of the clients abused our accommodation by paying after 45 days and sometimes even after 60 days. For sure they had earned from the cost of money that we had lost.

 

[Heatman]

Sorry my friend, I'm not really good at mathematics so it's going to be very difficult for me to give you an accurate calculation on what you are looking answers but I'm quite sure someone good in that area will offer useful assistance to you.

But let me ask you this question, why go into new negotiations on payment terms? The former one used wasn't favorable any more?

 

[Zakaria]

Because in the past we paid in advance and we don't want to continue il this way,i believe it's better !

 

[Corzhens]

Sorry my friend, I'm not really good at mathematics so it's going to be very difficult for me to give you an accurate calculation on what you are looking answers but I'm quite sure someone good in that area will offer useful assistance to you.

But let me ask you this question, why go into new negotiations on payment terms? The former one used wasn't favorable any more?

When you pay in advance that is the advantage for the supplier because they can use the money for the period that you have advanced the payment. Over here it is always the ploy of the customer to ask for a delayed payment (on credit for 30 to 60 days) otherwise it would be very difficult to obtain a new customer. You have no choice if you are the supplier because you have to oblige with the market standards.

 

[Heatman]

When you pay in advance that is the advantage for the supplier because they can use the money for the period that you have advanced the payment. Over here it is always the ploy of the customer to ask for a delayed payment (on credit for 30 to 60 days) otherwise it would be very difficult to obtain a new customer. You have no choice if you are the supplier because you have to oblige with the market standards.

If the supplier is truly trustworthy with lots of good reviews, I don't see any reason to why a customer would have the interest to go with delayed payment of products as long as the funds are readily available. Personally, paying before the products are delivered gives the customer more power to question the supplier should anything go wrong in the process of delivery or even as much as delayed delivery.