Every purchase order or invoice should have them, but what are they? Terms and conditions. The fine print found at the bottom or on the backside of in invoice or purchase order, so it is often ignored. Look for it, read it, understand it.
When a company purchases goods or services, it is not uncommon to pay the bill, overlooking the fine print or statement of Terms and Conditions. Many don’t realize this information explains legally binding details, including returns, warranties, waivers and limited liabilities. While more and more companies have turned to electronic invoicing, requiring the buyer to accept an agreement before signing off on a purchase, acknowledging does not necessarily mean they carefully read the information, and understood its ramifications.
What will the fine print reveal?
There are a number of important items to take not of in the Terms and Conditions. Things to look for include:
- Invoice due dates
- Payment discounts
- Credit requirements
- Payment defaults
- Returned goods
- Inspection and acceptance
Why should you care?
The legal system is bogged down with companies suing each other over terms and conditions. Buyers may have conflicting terms and conditions with the seller. In order to resolve the potential problem an invoice may contain language in the agreement stating that any terms contained in the buyer’s paperwork that is inconsistent will automatically be rejected. If a conflict persists, companies then look to the courts to make a decision. This can be difficult, time consuming and costly.
What does POS mean?
When is a sale not a sale? When it is consignment, and pay on scan (POS) is just another way to say consignment. With more companies using technology and adopting electronic invoicing, pay on scan is a worthy payment condition to consider, but remember under POS terms, the seller retains the title of the goods (i.e., inventory) until the actual product sells or scans through the buyer’s register. Under this situation, vendors are paid based on the end-user sale rather than upon receipt at the warehouse. Since POS is consignment, it is not considered eligible collateral for an accounts receivable line of credit or factoring.
Keep it simple
When you are drafting terms and conditions make sure it is carefully worded and fair to both parties involved. Whether you are the buyer or the seller, the goal is to conduct business successfully with all parties involved. If you are the seller and your terms and conditions are too aggressive, no one will want to buy from you; and you certainly don’t want to create an environment that makes the company more vulnerable to litigation on every sale.
Robyn Barrett is founder and managing member of FSW Funding, formerly Factors Southwest LLC, specializing in factor financing for small to mid-size companies. For more information, visit www.fswfunding.com.