A delivery payment is one that is made when products or services are received, rather than at a later date in response to an invoice. Billing terms for an account may require this as a matter of course or because of specific concerns about a particular client. A warning may be issued before delivery to make sure the customer is aware payment will be expected immediately. Depending on the product or service, it may be possible to invoice in advance so people know how much the bill will be; alternatively, an estimate may be provided.
For the company delivering, payment upon receipt offers a number of advantages. It receives immediate compensation it can apply to payroll and other expenses and does not need to track down payments from clients. This can make for a simpler billing and payments system. Customers may find it less advantageous because they cannot sell products or utilize services to generate income to pay the bill at some point in the future. Instead, they need to be prepared to pay up front.
Some industries use the delivery payment as a standard. Mechanics, for instance, often provide an invoice for immediate payment at the time a car is picked up. Similar procedures can be seen at medical offices for people who pay in cash. In other cases, billing terms where people have 10 to 90 days to pay are more common, and a delivery payment may be unusual. Individual firms may use a delivery payment system if they feel it’s necessary given the types of products and services they provide.
In this system, the company generates an invoice with information about the transaction and notes that it is due immediately. Products may be taken back if the customer does not pay. Services that have already been provided cannot be returned, but the service provider can take the customer to collections in order to get the funds. It may also blacklist the customer, refusing to provide services in the future because of failure to pay.
Clients can also be changed to delivery payment terms. This usually happens when they make multiple late payments or their credit ratings slip, indicating that they might not pay on invoices if given a chance to delay their payments. A wholesaler, for example, might send products via cash on delivery; if the retailer doesn’t have the money to pay, the products can be taken back rather than transferred. This reduces the risk of losing money on a retailer who never pays for products.