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Are there Really Standard Terms and Conditions?

September 26th, 2009 | Tags: , , ,
Harry Hough, PhD, founder of the American Purchasing Society

Harry Hough, PhD, founder of the American Purchasing Society

Editors note: Dr. Hough is a regular guest contributor to this blog.

All terms and conditions are subject to negotiation. A common practice for many suppliers is to have either preprinted payment terms on invoices or to insert terms that were never agreed upon. Some buyers may ignore these contradictions to their agreements and allow their own accounting departments to pay as they see fit, but there are several reasons why this is not a good idea.

Assume that you have negotiated for Net 60 and wrote that on your purchase order. Then the supplier ships the goods and sends an invoice with payment terms of Net 15. You do nothing and your accounting department pays the bill in sixty days. Meanwhile the supplier’s accounting department assumes you have paid late and, when asked by business rating services, answers that you are 45 days late in paying your bills. Bingo! Your company has unjustifiably earned a poor credit rating.

blog 58 Ts & CsSuppose instead of doing nothing, you object to the salesperson. You tell him you are very unhappy with the payment term on the invoice that does not match your contract or the term specified on your purchase order. He tells you not to worry, it doesn’t mean a thing. He says that is only a standard term for others. Don’t believe him. Maybe the supplier won’t refuse your business, but your credit rating could still reflect a bad report.

Or suppose your accounts payable people ignore the term on your purchase order and pay as indicated on the invoice instead. In this case you are being misled about the cost of the purchase since time is money and by paying earlier than what you specified your company is paying a higher cost.

If invoices aren’t usually seen by purchasing, the buyer should still make sure that accounts payable is comparing P.O. terms with invoices and making sure they agree.

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