What is a payment term? #
Payment terms refer to the conditions and expectations surrounding how and when payments will be made for a product or service. These terms can include factors such as the amount due, due date, payment method, and any penalties or discounts for early or late payments. Clear payment terms are essential for both the buyer and seller to understand and agree upon, as they help to establish a transparent and mutually beneficial business relationship. As a business owner, it is essential to communicate your payment terms to your customers to avoid any confusion or misunderstandings.
Common Payment Terms: #
Net 30 – This is one of the most popular payment terms, which means that the payment is due within 30 days of the invoice date. This gives the buyer a reasonable amount of time to process the payment and allows the seller to receive payment promptly.
Net 60 – Similar to Net 30, Net 60 payment terms mean that payment is due within 60 days of the invoice date. This is often used for larger purchases, and it gives the buyer more time to gather the necessary funds.
Due on receipt – This payment term requires payment to be made as soon as the goods or services are received. This is common for smaller purchases or services.
Payment in advance – Payment in advance requires payment to be made before the goods or services are delivered. This is common for custom orders or high-risk purchases.
Payment on delivery – Payment on delivery requires payment to be made as soon as the goods are delivered. This is common for businesses that sell physical products.
Installment payments – This payment term allows the buyer to make payments in multiple installments over a specified period of time. This is common for high-ticket items such as cars or furniture.
Where do we need to indicate payment terms? #
There are several documents in which payment terms need to be clarified to ensure a clear understanding between the buyer and seller. These documents include:
Sales order (SO): The payment terms should be clearly outlined in the sales contract, which is a legally binding document that outlines the terms of the sale.
Purchase order (PO): A purchase order is a document sent by the buyer to the seller, outlining the details of the order, including payment terms.
Invoice: The invoice is a document sent by the seller to the buyer, detailing the goods or services provided, along with the payment due date and any other payment terms.
How to set up payment term in Artintech ERP? #
You can use the “Payment Terms” section of settings menu to set up different payment terms. You can add the common payment terms used by your company and add a description to each term.
After this setting is done, the payment terms will automatically appear in the payment term drop-down menus across the ERP modules such as Invoicing, Sales Order, Purchase Order, Proforma Invoice, Quote, and so on.
