Business Purchasing Types and Payment Terms

Business Purchasing Types and Negotiable Factors

Types of Purchases

• Cyclic Purchases: These are routine purchases performed regularly. Examples include assets acquired that are not material to the company's formation, such as a special toothpaste, or a computer for the company. Buyers are typically represented and advised by a team of people.
• Seasonal Purchases: These are made with seasonal produce, and sales often relate to the previous period's temporary demand for particular products. A classic example is Christmas nougat.
• Immediate Purchases: These serve daily needs and represent low-risk investments, such as milk or bread.
• Opportunity Purchases: These occur when prices are low, and the buyer is not actively looking to buy. While investment carries a risk, the result can yield extra benefits, such as purchasing sunglasses during a promotion.

Factors Negotiable in Purchase: Discount, Time, Payment, Transport

Key negotiable factors include:

• Discount
• Time (of payment/delivery)
• Transport
• Packaging and other services
• Order Realization

Discounts and Rebates

Rebates on order volume are applied to motivate buyers to purchase larger quantities.

• Commercial Discounts: These apply only as a discount on the supplier's price list and may be accompanied by a quantity discount.
• Cash Discount: A percentage deducted from the amount due to the provider for payment in cash or within a specified short timeframe.
• By-Season Discount: Granted to the buyer for purchasing well in advance of the selling season.
• Promotional Discounts: A reduction in price offered if the buyer promotes the supplier's products.

Payment Terms

If payment established in the bill is not made by the due date, the provider is entitled to collect interest from the maturity date until the payment is made.

Payment Term Types:

• Regular Term: The payment date is the date of the bill, which generally coincides with the date of delivery. The invoice date always determines the payment due.
• Postdated Term: The repayment period is set for a date subsequent to the bill (e.g., 60 days from receiving the bill). These deadlines are established to encourage early purchases.
• Extra Time: The purchaser is granted extra days before the loan term must be cleared.
• Time from Receipt of Product: The credit period begins the day the buyer receives the goods, not according to the invoice date.
• Advance Payment: The amount of the bill is paid before the established date to utilize a discount. The buyer should pay the bill in the same amount upon receiving the merchandise.

Transportation

This covers the spending resulting from moving the goods from the seller's warehouse to the point of sale.

• Transportation: The journey conducted by road or rail (land transport).
• Freight: When the journey is by boat or plane (river or air transport).

The buyer always tries to negotiate carriage conditions with a provider for several reasons:

1. The amount of transport increases the cost of the goods.
2. The cost of transport is always attached to the insurance of goods due to potential risks incurred.
3. The provider may have a chance to secure transportation at a lower cost because they can serve several buyers on the same trip.