Suppliers urged to agree payment terms early

18 May 2006
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19 May 2006 | Paul Snell

A third of suppliers are putting their cash flow at risk by not providing written confirmation of their credit terms, according to the Better Payment Practice Group (BPPG).

In an online survey it found 32 per cent of the 280 respondents did not send customers any written confirmation of credit terms. Medium-sized businesses are the least likely to send terms, with 43 per cent not doing so.

René de Sousa, BPPG representative for CIPS, said: "By not agreeing terms up front, businesses are putting their cash flow at risk of abuse from late payers. There needs to be an understanding between buying organisations and suppliers."

De Sousa said one reason for this was because industry has become more "mechanised" and "dynamic" and many businesses are not paying enough attention to the details.

"We would emphasise these details to prevent problems occurring later," he added.

Another common problem is that terms and conditions are often organised separately to the placing of the order, leading to the assumption that someone elsewhere within the business has already sent confirmation.

The BPPG is urging businesses to confirm their terms with customers before they start trading. Recriminations for unpaid debts could be costly, and may even involve legal action.

"Success for business means getting money in," said de Sousa. "Payment is the lifeblood, especially for many smaller organisations operating on very tight cash flows."

SMmay2006

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