What are accepted practices for paying invoices that have due dates that fall on a weekend or holiday? Also, how is the "average days to pay" metric currently being used?


Generally, when the payment due date falls on a weekend or holiday, expert David Hay noted that generally the next business day becomes the de facto due date, with a few exceptions like utilities and credit card payments, which must receive payment prior to the due date that falls on a weekend or holiday.

That said, another of our experts -- Judy Bicking, formerly with Johnson & Johnson, would not say there's any "standard" and notes that this issue is a double-edged sword. If you ask suppliers (credit dept.), they expect payment on the due date. If it falls on the weekend, they expect payment on Friday before.

However AP departments over the years have set various strategies to extend terms, such as rather than start the clock when the invoice is dated, they will start the clock when the product is received or when the invoice isreceived error free (i.e. contains a valid PO).

When a company moves to electronic payments, they may negotiate with the supplier to whom historically they have paid their net 30 days in net 38 (which included paying when product was received and payment was posted on the due date, therefore taking advantage of mail float as well); and they expect the same terms (net 38) if they move to electronic payments.

On the other hand, we are aware of many large companies from an AP strategy that have negotiated to make the payment electronically on the invoice due date only if the supplier meets certain requirements in return. For example, if the invoice is sent electronically, contains a valid PO, and there are no matching issues, etc.

This can be a great way to reduce cost on both ends and there is a hook to fix issues, thus reducing head count.

Most credit departments do not start collecting process on invoices until past due 10 days. It is not worth their resources. However if the company is facing cash flow issues, they will actually call before the invoice is due, to insure payment on time.

With regard to days to pay, TAPN has a recent survey looking at Invoices Blocked or Held that includes survey data on days payable outstanding. Median DPO is 36.5 days; first quartile was 26; 3rd quartile was 45.

Have more questions? Submit a request