How should you respond when a customer asks for extended payment terms?

How should you respond when a customer asks for extended payment terms?

1. Talk it out. Don’t avoid the conversation; doing so only risks creating the expectation that the request has been approved.
2. Offer incentives.
3. Consider financing.
4. Consider negotiating.
5. Explain your business.
6. Just say no.
7. Know your customers.

What is the effect of extending payment terms to a supplier?

The introduction of this third party adds flexibility to the relationship: Organizations can extend payment terms while at the same time reducing the amount of time it takes suppliers to get paid. Ultimately, this means more liquidity for both buyer and supplier, increasing efficiencies across the relationship.

What are extended payment terms?

Extended payment term is a strategy companies use to delay payments of invoices. It is usually a bit longer-than-normal period, which can sometimes exceed 120 days or more.

What is the benefit of extended payment terms?

Extended payment terms and the increase of working capital reduces the need for corporate loans, and provides more cash stability during the peaks of expense flow. Another benefit to receiving extended terms from the supply base is the perception of your company’s stability and supplier trust.

How do you ask a supplier to extend payment terms?

Ask for the most Be reasonable in your ask, but aim to ask for the higher end of what you need. This is a negotiation, meaning there will be some back and forth as come to terms that work for both parties. For instance, if you need more time than your normal 30-day payment terms, ask for 60 days.

How do you negotiate a payment term?

How to Negotiate Better Vendor Payment Terms

1. Start building better relationships.
2. Understand which suppliers are worth your time.
3. Have this conversation with the right people.
4. Make your offer mutually beneficial.
5. Aim high, settle lower.
6. Explore payment options with your business card.

How do you negotiate extended payment terms with suppliers?

Why do payment terms matter?

Payment terms govern the schedule of payments. They also prevent any misunderstandings that your customers might have in the future. In addition, they detail the reasoning behind the rates, and any complications that might be present.

What does extended mean?

Extended Term means the period subsequent to the expiration of the Primary Term which this Lease is actually in effect.

How do you calculate extended payment terms?

The formula steps are: Calculate the difference between the payment date for those taking the early payment discount, and the date when payment is normally due, and divide it into 360 days. For example, under 2/10 net 30 terms, you would divide 20 days into 360, to arrive at 18.

Why do companies have payment terms?

Payment terms are also crucial for cash flow management. If you’re in the manufacturing or construction industries, you probably require large early outlays of capital. The extra days will allow your organization to better manage its cash flow and regulate the purchasing of inputs to ensure you have the goods you need.

How to decline an extension of time for payment?

Nevertheless, in a situation where you must decline an extension of time, you need to state the basis of the decision to clarify your position to the client. This can be done tactfully, without creating an impasse for further negotiation. The example below is based on declining an unacceptable proposal for extension of time for payment.

How do you respond to a payment request for extended terms?

Previous payment experience with the customer can also help support extended terms.” If you get a request for delayed payment (beyond your agreed net payment terms), you will want to know in advance how you’ll respond. Use these tips to craft effective responses so you can stand firm on your dates and ensure payment. 2 Talk it out.

How to refuse a request for an extension of time?

The following sample letter can be used to refuse their request. Thank you for your recent communication requesting an extension of time to make your payment due on (dd/mm/yyyy). I/we would refer you to my/our letter to you dated (dd/mm/yyyy) in response to a request from you to defer your then due payment.

What to do if you get a request for delayed payment?

If you get a request for delayed payment (beyond your agreed net payment terms), you will want to know in advance how you’ll respond. Use these tips to craft effective responses so you can stand firm on your dates and ensure payment. 2