Payment terms refers to when payment for an invoice is expected, or should be paid.
This applies to both sales as well as purchases.
For customers, when you issue an invoice to them, you will indicate when payment is due.
For purchases, your supplier will also indicate when you should make payment for the invoice.
Payment terms in ABSS
In ABSS Accounting and ABSS Premier, there are 6 payment terms options for both sales and purchases.
C.O.D or Cash On Delivery means payment is made as soon as the goods are delivered or the service rendered.
Prepaid requires payment before delivery of goods or services are rendered.
With prepaid terms, the customer would make payment first, then receive the goods or services.
In a Given # of Days
This would generally be the most used payment terms for most businesses.
In a Given # of Days requires payment within the specified number of days from the date of invoice.
For most businesses, this would be 30, 60 or 90 days, according to your business policies.
On a Day of the Month
Payment is due on a specific day of the month.
For this payment term, you will need to select which calendar day the payment is due.
An example of when you could use this would be for rental payments, which are generally due by the 7th of each month.
# of Days after EOM
Payment is due after the end of the month in which the invoice was issued.
If the invoice is dated 11th May, and you select # Days after EOM as the payment term with 14 days, the payment will be due on 14th June.
This could be used in cases where your customer has a policy of processing payments on a specific day of each month, and has requested that you allow for that.
Day of Month after EOM
EOM is End Of Month.
For this payment term, you would also need to select the day of month when payment is due.
How are setting payment terms useful?
Setting payment terms for both sales and purchases helps you manage receivables and payables.
If you set the payment terms when recording a sales invoice or supplier bill, you will be able to see when they are due.
ABSS AR To Do List – Receivables
ABSS AP To Do List – Payables
To view which sales invoices or supplier bills are due, you can go to the ABSS To Do List as shown above.
The payment terms are also used to provide ageing in the Receivables and Payables report, i.e. whether in the 30 days, 60 days columns.
Payment terms are also used in the statement of accounts that you send out to customers.