What is the best practice when it comes to payment terms by spend category/commodity? For example, telecommunications—net 45, chemicals—net 60, discount, etc.


In the U.S., average terms are 30 days, though there are variations, which may be according to vendor/spend type. The AP Network has not done a survey on terms by industry, though our survey on the State of Accounts Payable 2015 does show (aggregate) allocation of payment term ranges as follows:

Percent Allocation of Vendor Terms

Terms Avg Value Std Dev
0-10 days 14% 19.7
11-29 days 10% 19.9
30 days 52% 34.9
31-45 days 16% 28.1
46-60 days 6% 16.3
> 60 days 3% 11.6

There is much that the above findings do NOT tell us, including terms by industry/spend type. Terms do vary by spend type, though that is not the only reason for variance. Often respective leverage of the parties in the transaction bear on how long a company takes to pay a vendor. Large customers have insisted on longer terms with smaller vendors, where as a small customer of a large vendor can expect to pay on shorter terms. For example, an April 2013 article in the Wall Street Journal revealed the pinch put on vendors by Proctor & Gamble. And the economic downturn that began in 2008 saw a lot of organizations stretch payments.

We have not been able to locate any studies analyzing terms by industry. Often, service sector payment terms are shorter vs. manufacturing sector.  At one time, the shipping industry was regulated with short terms enforced, and while that’s no longer the case, the legacy is that shipment services have shorter than average terms.

You may want to post your question to TAPN’s Forum to solicit the input of other members, based on their experience.

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