USA Question about Net 30 payment terms

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My company pays invoices that are labelled "Net 30" with checks issued within 30 days of the date of the invoice. So if an invoice comes in dated 3/22, they will cut a check on 4/21 and mail it out. Which means that while the funds have been allocated on our end with 30 days, the vendor might not receive payment within 30 days.

Is the way my company is interpreting Net 30 correct? I was under the belief that Net 30 meant the vendor has to receive the funds within 30 days, not just that we have to issue payment within 30 days.
 

kirby

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Well, the vendor REQUESTS to be paid within the 30 days. That wording may or may not have been included in the sale document. Note that if you do not pay in the 30 days there is no stated penalty, at least not from what you've told us.

Now - what should YOU do about the fact that your company does not actually pay within the 30 days?

Here is the answer ---- NOTHING!

If you run to your mgmt insisting the payment method be changed they are likely to -at best ignore you and -at worst determine they really need to make a change to get someone in your position on their side and not on the side of the vendors.

If the vendors are unhappy with your company's current payment methods, the vendors will contact your company and let them know.

So, it was an interesting question - but now just relax and carry on.
 
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Well, the vendor REQUESTS to be paid within the 30 days. That wording may or may not have been included in the sale document. Note that if you do not pay in the 30 days there is no stated penalty, at least not from what you've told us.
Net 30/60/90 are standard terms on invoices. There's no "sales document" involved. This is just standard operating procedure for just about any vendor I've every dealt with.

Now - what should YOU do about the fact that your company does not actually pay within the 30 days?

Here is the answer ---- NOTHING!

If you run to your mgmt insisting the payment method be changed they are likely to -at best ignore you and -at worst determine they really need to make a change to get someone in your position on their side and not on the side of the vendors..
Well, we have had disputes with vendors about this before. Really, I was trying to find out if there's a standard interpretation of these common payment terms so that I knew whether we were doing something hinky or not, and depending on that answer, how much I could push back against the vendor. If it turns out that the standard practice is that payment must be received by the vendor with 30 days then I don't have any leg to stand on and I can't take a tough stance with them.

If the vendors are unhappy with your company's current payment methods, the vendors will contact your company and let them know.
Several have. And I am worried that our company is in the wrong here. If not, I can lay down the law with our vendors, but if technically we're at fault then that's less of an option.

I had expected to get an answer from someone who was more familiar with these payment terms, but it sounds like you are not. Thanks for your reply anyway.
 

DrStrangeLove

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My company pays invoices that are labelled "Net 30" with checks issued within 30 days of the date of the invoice. So if an invoice comes in dated 3/22, they will cut a check on 4/21 and mail it out. Which means that while the funds have been allocated on our end with 30 days, the vendor might not receive payment within 30 days.

Is the way my company is interpreting Net 30 correct? I was under the belief that Net 30 meant the vendor has to receive the funds within 30 days, not just that we have to issue payment within 30 days.
You're in a gray area. It sounds like your company is relying on the "mailbox rule" that's common in American contract law when applied to acceptance or rescission of offers. I don't know that it necessarily applies to payments as well; that would be a legal question that depends on your jurisdiction. But from what you wrote, it sounds like there's enough daylight between your interpretation and your vendors' interpretation that you might want to either come to a common understanding or retain counsel (assuming you don't have someone in-house already) to research the issue and give you a better legal answer.

I suppose it depends on how much you need these vendors and how much you rely on their extending your company trade credit. Even if your company's interpretation is technically correct--the best kind of correct--your victory may be Pyrrhic. Your vendors might decide you're not worth extending credit to anymore and require you to deposit cash up front.
 

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