Some of the changes in payment terms that we expect to see post-Covid-19 include:
#) Formulation of payment terms will be dependent on the financial health of the customer and their previous record with other suppliers.
More than ever before, businesses will check in directories such as brodmin to see if their customers have been reported for not honouring their financial commitment after receiving invoices.
If the customer has been reported several times by other suppliers, the business will most likely request advance pay, or payment on delivery to minimize the risk involved.
#) We shall see more businesses demanding a contract with a customer to be signed before they can proceed with the transaction.
A contract adds an extra way through which a business can legally pursue a customer who refuses to honour their obligation after receiving an invoice.
With a clear contract, it would be easier to state the course of action that is to be undertaken if the invoice is not paid after it falls due.
The idea of businesses only relying on an invoice as a source document will be abandoned by most businesses and freelancers.
With a signed contract and all transaction documents available, businesses will be wary of the other party pursuing legal solutions to unpaid invoices.
#) More sellers will now keep an eye on their customers’ financial health and ensure that they adjust the payment terms based on it.
This will motivate more businesses to maintain a good reputation to get better payment terms from their suppliers.
This is because the financial health of the company from an outsider’s perspective can be directly related to their ability to fulfil their financial obligations including invoices that have fallen due.
#) More sellers will break down the supply order and the invoices being delivered to the customer.
The invoices will also have different due dates to ensure that the risk is reduced.
The breakdown of the supply orders will ensure that they are getting regular payments instead of one consolidated payment.
#) More sellers will now engage financial consultants to help them create a credit plan that ensures the long-term financial health of the business.
With clear credit limits, a business can manage its credit risk and maximize the profit from credit transactions.
Payment terms put forward by the suppliers will take into consideration the credit limits of their own business.