Introduction

Making improvements to working capital or cash flow requires a clear understanding of the details of current work processes, including fundamentals that include when payment terms begin, and the frequency and timing of payment runs.  For example, saying your payment terms are 45 days means different things if the clock starts based on the invoice date, the date the invoice is received, or the date materials are received.  Actual payment terms are also impacted if payment runs occur daily, or if they take place semi-weekly, weekly, or at some other frequency. 

Fortunately, for Peeriosity members, it’s easy to draft an iPolling^TM question and instantly find out how other members tackle the problem, with the ability to directly follow up with other participants for further discussion and dialogue.  With Peeriosity, your poll will go to hundreds of members for a possible response, with those that have knowledge providing inputs that are likely to be directly on point to solve your issue, all at no cost to you.  Plus, the exchange is completely private, with only members whose companies provided an answer to the poll questions able to access the detailed results and findings.

iPolling^TM Results Review

Recently a Peeriosity iPolling^TM question was created by a Peeriosity member company’s Finance Director to find out how other companies administer payment terms and the frequency of payment runs.  The results suggest that 84% of member companies begin the clock for payment terms based on the invoice date and 13% begin the clock based on the date the invoice is physically received for processing.  Here are the details:

Regarding the timing of payment runs, while 38% reported daily payment runs, a significant number of companies have payment runs that are on either a twice-a-week or weekly cycle. 

Here are some of the comments from responding companies that provide additional insight into the approaches member companies take to these types of transactions:

• Terms are driven by vendor master data, which is approved by Purchasing. The invoice date is used for physical invoices, for evaluated receipt settlements goods receipt date becomes the invoice date. Payments are disbursed daily for ACH, if payment is made by check or wire they are disbursed twice a week.
  

• The majority of our payments are done weekly; however, our Domestic ACH payments are done twice per week.

• Daily payment runs in the US. Other countries are less frequent.
  

• The payment terms are decided by Supply Management and the supplier and is on the PO.
  

• Payment runs are weekly, but we do track exceptions and report that out monthly.
  

• We have a weekly check run, but process ACH daily.

• Our main payment runs are Tuesday and Friday.

• We pay according to terms established with each vendor, aged from the date of the invoice. Domestically, we process payments (pay cycles) every working day and 2-3 times per week for international locations.
  

• Payment runs vary from daily to semiweekly based on the volume of payments, as well the number of urgent payments, etc. in certain countries based on business needs, etc.

• Payments are run daily for wire payments, and weekly for checks.
  

• Primarily based on the invoice date, but there are exceptions where the payment due date is calculated based on the physical receipt of the invoice. Payment runs are done weekly, but there are cases where it happens more often.

• We currently use invoice date, but we plan to move to invoice receipt date.
  

• Discount vendors are paid daily, none discount vendors are paid weekly.

• Terms are driven by vendor master data. The invoice date is used for physical invoices. Payments are disbursed semi-monthly. Emergency check runs are processed as required and must be approved.

• Disbursement frequency varies by business, but we are moving towards daily pay run frequency.

Closing Summary

Large multi-billion-dollar companies aren’t immune from the daily challenges and questions about how to fine-tune their processes to make them better.  Many times, the issues are the same as those faced by companies with a smaller scale; however, for larger companies, because of the volume of transactions the impact of even a modest change can be significant. Being able to quickly identify the details of how leading peers approach similar challenges is a real advantage for making the types of changes that will create the greatest impact. 

How does your company start the clock for payment terms, and what is the frequency of payment runs?  When you have a process constraint or bottleneck where you know there has to be a better way, do you have a method to connect directly with peers at leading companies to explore options that might work better?

Who are your peers and how are you collaborating with them?

“iPolling^TM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer Mail^TM, members can easily communicate at any time with others who participated in iPolling.