How to calculate the payment term for suppliers?

The payment period for suppliers is an essential element in the financial management of a company. It represents the time elapsed between the receipt of the goods or the performance of the service, and the actual payment of invoices due to suppliers.

Optimization of the Management of Supplier Payment Periods: Parameters and Financial Incentives.

To calculate the payment term for suppliers, it is necessary to take into account several parameters. First of all, it is worth noting the date the invoice was issued, which corresponds to the moment when the supplier sends its payment request to its customer. Next, consider the due date on the invoice, which represents the limit beyond which payment is considered late.

This date can be set according to the general conditions of sale CGV negotiated between the supplier and his customer. If the payment is made before the due date, the company can benefit from a discount, which corresponds to a reduction in the total amount of the invoice. This is often an incentive for customers to pay their bills quickly and allows suppliers to strengthen their cash flow.

Management of Late Supplier Payments: Penalties and Legal Provisions.

In the event that supplier payments is not completed by the due date, late payment penalties may apply. These penalties can be expressed as a percentage of the total amount of the invoice and are governed by the Commercial Code. They represent a fixed compensation that the supplier can claim in compensation for late payment.

Supplier Payment Deadlines and Financial Consequences.

It is important to note that the legal interest rate may also apply in case of non-compliance with payment deadlines, which may result in administrative fines issued by the Ministry of the Economy. In terms of supplier payment terms, the law on the modernization of the economy has set a legal maximum period of payment at 60 days from the receipt of the goods or the performance of the service. However, there are derogations for certain sectors of activity and agreements can be reached between companies to reduce deadlines. It is also important to emphasize that respecting payment deadlines has a direct impact on businesses' cash flow. Indeed, late payment of invoices due to suppliers can cause cash flow and liquidity problems, while early settlement helps maintain good working capital.

Optimization of Working Capital Requirements: Strategies for Managing Receivables and Debts.

The working capital requirement (BFR) represents the difference between trade receivables and payables and reflects the cash flow requirement of a company to finance its operating cycle. To avoid late payments and cash flow problems, it is recommended that businesses implement rigorous management processes, such as regularly monitoring invoices and payments, sending reminders in case of late payments, or even using factoring to outsource the management of trade receivables.

Control of Supplier Payment Deadlines: Crucial Factors and Implications for Financial Management

In summary, The calculation of the term of payment of suppliers requires taking into account the date of issue of the invoice, the legal maximum payment period, the terms of settlement negotiated between the supplier and its customer, any late payment penalties and default interest. Respecting payment deadlines is essential for maintaining a good relationship with suppliers, avoiding penalties and fines, and maintaining a company's cash flow.