Syncing supplier payments letter

Most invoices proclaim settlement terms of “30 days from date of invoice”. The problem is that this gives you a random pattern for supplier payments throughout the month. How can you get your suppliers to buy into a more convenient payment date for you?

From end of the month

The classic way of dealing with this is to have set days/dates for supplier payment runs, and then put up with the inevitable chaser calls from suppliers asking to speak to “Accounts” because your payment to them is “late” and that you have missed their “pay by” date. In response you probably tell them that you operate a batch payment system and they will be included on the next payment run.

Instead, consider writing to your suppliers explaining that you’re rationalising your accounts payable procedures and will pay 30 days from the end of the month of delivery - but for key clients you might want to pay sooner. Explain in your Syncing Supplier Payments Letter that, in order to make procedural efficiencies and ensure suppliers know exactly when they are going to be paid, you are moving from your existing variety of (30 days after the invoice) settlement dates to a clear “30 days after the end of the month of delivery”. This then gives you a single month-end payment run and because you have notified suppliers of your accounts payable procedures in advance, it should cut down on the number of chaser calls.

You could sweeten this change in terms by advising suppliers that the payments will be made by direct transfer if they supply their bank details.

For any key suppliers or where you want to take advantage of early payment discounts, mark these particular invoices as “Pay by ..... (insert date)” and diarise the payment date in your Outlook calendar or accounting system. If you can get, say, 5% knocked off for early payment, then it's worth considering paying these suppliers early to take advantage of the discount.