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- Consignments; Consignment Sales
- Example of a Consignment Agreement
- Pay When Paid Terms
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- Key Activities of the Credit Department; Role of the Credit and Collections Department
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- Economic Downturns; Recessions; Layoffs
- Electronic Data Interchange (EDI)
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- Escalating A/R Problems to Management
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- Lockbox; Bank Lockboxes; Improving Cash Flow
- Motivation and Performance
- UCC 1 Perfection by Filing
- Required Areas of Knowledge for a Credit Professional
- Impact of Bad Debt Write Offs; Bad Debt Losses
- Shipping Procedures
- Improving the Effectiveness and Efficiency of the Credit Function
- Building Bridges Between Sales and Credit
- Dormant Accounts
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Pay When Paid Terms
Some customers may indicate or even insist that they can only pay you as a creditor only when their customers pay them. This is called pay when paid terms. It is not unlike a consignment arrangement except for one important or critical fact. The difference involves the fact that the seller has not agreed in advance to this arrangement ahead of time and instead expected to be paid on the due date listed on the invoice.
The problem is that when your customer has your money and your merchandise as they would with sales on open account terms the customer is clearly in a strong negotiating position. The best way to address this problem is to tell the customer that the agreed terms are whatever terms appeared on their PO and your invoice.
If a customer wants to negotiate consignment terms, that is a separate discussion that needs to take place with sales and before the next order is shipped. In the interim, the debtor should be required to pay the past due balance.
© 2011. Michael C. Dennis. All Rights Reserved. Michael is the author of "Credit and Collection Handbook."