Loading...
 
 

IACCM Contract Management Forum

« view all forum posts

Schlumberger India
2017-01-13 06:46:58

Payment Default by Customer

Even after having Payment Terms as XX days, at times Customer is not paying as per agreed payment cycle time.
What are all the methods we can use to expedite the Customer for receiving payment other than using "Applicable Law" provision of Contract.
 
 •  IACCM  •   2017-01-13 10:43:50
The answer to your question is that first you should look beyond the contract and explore the commercial factors that might influence a solution.
- what is the reason that the customer is delaying payment? Are they unhappy with your performance or is it perhaps due to their process; for example delay could be due to their payment cycles, or because of the need for internal sign-off by a particular individual.
- if you identify the cause, you may find an immediate remedy - eg change your invoice date to better align with the payment cycle, or work with your customer to see how approval can be streamlined.
- if there is no apparent reason, do you have leverage with the customer - for example the value of your supply - which could be used to encourage greater discipline? Can you explain to them the impact that delayed payment is having on your business and the possible flow through of consequences on the quality of supply.
- as a last resort, the remedies may include a charge for late payment, a threat to raise prices or a formal notice of breach and requirement for advance payment. But these really are last resort solutions because they run the risk of severely damaging your relationship.
 
 
 •  BCA - BETTENCOURT DA CAMARA - ADVOGADOS  •   2017-01-18 11:09:08
As Tim said, first of all you have to ask your customer what is the reason for delaying payment. In case your customer alleges financial or liquidity problem, you can make an amicable settlement plan by making the customer sign a payment plan to settle the debt in monthly installments. In this case, i would advise to ask for an immediate 1st payment that can cover your costs of production.
In case your customer alleges quality problem, you should check the contract terms to see if there is any clause about the term to raise a complain about quality. You should also ask for proves, for example photos. never accept a quality complaint without proves.
In case of quantity complaint, you should check if there is any clause in the sales contract about allowing variation of quantity. many contracts have this type of clause, as for example allowing 5% more or less quantity. In any case, I would advise to always try the amicable means before threatening with stronger measures or legal actions.
 
 
Replies: 2
 
Filter by category
 
Process
 
Operations & Capabilities
 
Organization & People
 
Strategy & Management Tools
Networks