Payment Terms: The Hidden Benefits of Embedded Invoice Financing for Your Business

It's hard to imagine that your suppliers' payment terms could actually accelerate your business, right? However, most companies, especially those in the digital realm, should take a closer look. We're here to uncover the often-overlooked advantages of providing instant payment options for your service providers on-demand.

1 – What Do a Company's Supplier Payment Terms Consist Of?

The concept of payment terms encompasses several aspects, including the payment deadlines granted on invoices. Let's delve into the various possible modalities, both legal and contractual.

1.1 – Components of B2B Payment Terms

In general, payment terms on an invoice encompass both the granted timeframe and available payment methods. They also include regulatory information regarding financial penalties when payments occur after the due date (late fees and fixed compensation). Additionally, the possibility of an early payment discount may be included.

1.2 – Invoice Payment Timeframe: Legal Obligations

The invoice payment method (check, SEPA transfer, SEPA direct debit, promissory note, etc.) is an agreement between the customer and the supplier. Even though businesses are free to set invoice deadlines in B2B transactions, they must adhere to the legal framework for payment periods.

a – Various Feasible Time Frames

The payment time frame corresponds to the credit that the supplier may grant to their customer for settling an invoice. In the case of immediate payment, no credit is extended. Therefore, payment is expected immediately upon the completion of the service or delivery of the goods.

Payment upon receipt of an invoice typically implies a payment period of one week after the sale. As for other possible deadlines, they fall into either the category of default legal deadlines or negotiated deadlines.

b – Application of Standard Legal Deadlines

In the European Union, the standard legal deadline for B2B payments is 30 days from the date of delivery of goods or services. However, businesses can negotiate longer payment terms with their suppliers, up to a maximum of 60 days from the date of invoice or 45 days after the end of the month in which the invoice was issued.

c – Negotiating Contractual Deadlines With Each Supplier

Every company has room to negotiate different payment terms within a client-supplier agreement. However, keep in mind, there are legal boundaries. Your negotiated timeframe can't exceed either:

• 60 days from the invoice date
• 45 days from the end of the invoiced month (often referred to as a "derogatory" deadline)

The law also dishes out unique payment deadlines for specific cases based on transaction types, industries, or invoicing methods.