This will depend on the seller’s payment terms, but usually, the period is usually either net 30 days, or 60 days or 90 days upon receipt of goods and services.
This is an area of concern for most businesses as clients will often have their own terms of paying for goods and services.
Okay, let me give you a good example of what I mean by this;
For example, let’s say a sole proprietor named John, runs his own business that provides electronic products that can only be used on a plane. He deals mostly with small jet craft companies, and the technology is only for a specific type of airplane.
Then, a national airline he never deals with contracts him to deliver around 1000 of this product. What will John do? He will be very excited about the huge order, and of course, deliver the product and then send them an invoice explicitly telling them that his payment terms are net 30 days always.
The airline, on the other hand, says that they usually pay all invoices after 90 days. John will be in a difficult position, because he knows that this order will help in expanding his business, but then, doesn’t want to wait 90 days for the payment. That is like 3 whole months!
What John should have done to avoid this situation would have been addressing his payment terms once contact was made by the large airline.
In this way, he probably would have been able to convince them to first make a partial payment to show commitment. Now that it was not done. He is in a mess.
Well, in the end, he may have to just wait for the 90 days to elapse since he already delivered the goods and a payment of such magnitude will potentially change the course of his business. Meanwhile, he may be forced to sell the invoice through Invoice Financing (I have explained this in a previous blog, please keep an eye out for it) this will help him with some much needed cash flow for the continuity of his business.
This is what I was trying to explain; that payment terms are a huge area of concern for small businesses that need fast payments.