Credit terms can be defined as the contract between seller and buyer that contain the lists of time

and amount which will be paid by the buyer in the future. In other words, this is the contract that
defines in details sellers’ payment necessities that the buyer must meet into order to purchase
goods on account. (Sunil chopra and peter meindel. (2002),

Always credit terms are symbolized as x/y, net z where x is offered discount percentage while, y
is represent the number of days in which the discount can be availed and z is the credit period.

In business it is very important understand to understand and follow the credit terms because
failing to meet them may lead to penalties and poor credit history. Business’s calculate the cost
of foregoing trade credit and compare it with their cost of capital. If the cost of foregoing trade
credit is higher than the cost of capital, it is financially beneficial for them to avail the discount.

In other hand can be defined as the terms that tend to administer a credit sale. Credit terms
present an arrangement between a buyer and a seller regarding the expected payment date, any
discount offered and the period in which discount is offered

Purchases can be made on account when companies have credit policies set up with vendors or
customers .Credit purchase help speed up commerce and increase sales because before they
actually have the funds to buy they allows customers purchases items. Credit term must be
established before a credit sale can be made, most terms are dictated by industry practices and
the specific goods sold in those industries.( Jeremy F Shapiro.(2001)

Supply chain; is the process of supplying what is demanded (fulfilling demand) various players
and activities are involved. The players and activities involved in their succession referred to as
supply chain. There is various definition of supply chain and the common defined is system of
organizational, people, activities, information and resources involved in moving a product or
services from supplier to customer

Supply chain management; is the process of identification, acquisition,acess,positioning of

resources and related capability the organization needs or potentially needs in the attainment of
strategic objectives such as strategic sourcing of direct and indirect materials, services and
capital equipment in general supply chain management encompasses the planning and
management of all activities involves in sourcing, procument and conversion of resources into
desired product r services and all logistic management activities .Supply management also
includes coordination and collaboration with other players in essence supply chain management
integrates supply and demand management within and across companies

Through offering cash discount; particulars when you offer credit on business to business
basis, most companies offer other business a cash discount. In other words, if the business pays
the bill within the discount period, that business gets a discount. If they don’t pay within the
discount period, then they must pay within the credit period or the original period within which
the bill is due

By looking the effect on cost of goods sold; whether you sell product or services you have to
have then available and in the case of product in stock, when a sale is made. When you extend
credit that means paying for that product or services in order to have it in stock but not getting
paid for it immediately when it is purchased. Even through you will eventually get paid your
business has to have enough cash flow to compensate for delayed payment. In additional you
lose any interest income you might have earned on that money.

Rising price due to effect of sale revenue; the reason you would grand credit in the first place is
so your customers can delay paying you, this is convenient for your customers and will probably
win customers for you, but it is not so convenient for you bottom line, at least on an immediate
basis. Sales revenue from the sale you made to your customer will be delayed for either the
discount period or the credit period, or perhaps longer if the customer is late in making the
payment. The upside is that you may be able to raise your prices if you offer credit

Installment; an installment loan is a loan in which there are a set number of scheduled payment
over time. Many different types of loans are installment loans, including mortgages and auto
loans. A credit may require a monthly minimum payment but it is not an installment loan.
Installment loans can be used to help build credit for people with bad credit, poor credit or no
credit history. Since installment loans require multiple payments over time, they may help create
a history of payment; payment history is reporting agencies and may help improve a credit score
if a borrower timely payment.

Special conditions; in credit term, large accounts frequently specify requirement for invoice
preparation. They may require references to a purchases order, proof of delivery, or a certain
number of copies. Be certain that these conditions are met when the invoice is first prepared and
submitted in order to avoid delays and duplication of effort.

Customer satisfaction; that in order to meet your customer expectations ensure you are
delivering the services/ product that your customer is expecting .It is easier to ask for payment
when customer expectation are met

Through progress invoice; this is most important in credit terms implantation towards supply
chain management in fact that progress invoice tend to have system which has worked spanning
more than one month. This have a tendency to ensure the number of days your cash spent on
suppliers is as close as possible to the number of days it takes to receive payment for the work
completed.

Through credit bureaus; in other name this called credit reporting agency in which the
companies tend to use in collecting the important information from creditors pr lender
concerning with financial behavior. The process which help different company to know to make
evaluation of risk that concerned with supplying product to the customers, in fact that the
company will exactly understand effectiveness and strongest of the customers before to supply
the product, therefore, through this the company will ensure and to be able reduce the risk when
the customer fails to made the payment. So according to purchasing power the company will able
to supply the product to the customer

Through Promissory note; This is promise made by the person in which a person supposed to
sign when he/she made a promise to borrow the product from the seller that the payment should
be made. As we know promissory note it occur when there is agreement between the lender and
borrower in which the borrower make a promise with the lender to pay the specific amount what
they were specified in a specific date. This financial instrument contains all the terms pertaining
to the indebtedness by the issuer or maker to the notes payee, such as the amount, interest rate,
maturity date, and place of issuance, signature of the issuers.

Through profit and loss statement; This tends to show how much profit or loss a company has
created over a period of time when conducting manufacturing. Also it help to show the revenues
and sales of the company earned from a particular period of time with its expenses, the process
which tend to ensure the supply to know and differentiate the better company that has good
revenue and profit which can afford offered price of the goods.

Customer cash flow; Always if the company cash flow is higher, to supply customer credit will
be little difficult, because it reduce the cash amount of the company and hence can fail to
proceeds with the production therefore through that cash outflow, to the borrower the credit must
be very difficult to advance it.

Co-signer; This is a person who supposed to sign a loan document, and he is the one who take
debt equal responsibility. So when the credits are not enough to qualify for a loan on their own
the borrower supposed to use co-signer , but when the borrower fail to pay the amount agreed on
time. The co-signer should be responsible for it because he is the one who assist the borrower.

Codifying credit policy; This act as the framework which used in business in making decision
in credit customer extend because is the preliminary goal of credit policy. Credit policy is
responsible to avoid extending of credit policy to customer, through credit check, customer credit
application as well as specific document.

Conclusion; Supply chain management requires businesses to examine every process in their
supply chain and identity areas that are using unnecessary resources, which can be measured in
dollars, time or raw materials. This will improve the company’s competitiveness as well as
improve the company’s overall profitability.
Payment schedule

Business dictionary define payment as a timetable by which payments are made to a

contractor or creditor, it is the notice in writing which must be operated on applicant when the
defendant has no intention to pay the full amount as required by act in payment of due date, and
it does not matter when the defendant believes that the applicant is permitted or not permitted to
create a calm.

Also payment schedule defined as the financial instrument that helps to defined when, how, and
in what payment from re due for a specific purchase to a creditor, which acts as a timetable.
There are several different ways for a schedule to be structured, depending on the terms agreed
upon by the two parties but most of the schedules need to consist of the following amount of
payment to be tendered, the start date, identify payment frequency and specific date such as
weekly, monthly, or annually and maturity date of end date for the obligation.

Supply chain management; Is the omission of material, information, and finance from supplier
to manufacturer to wholesaler to retailer to consumer as the process. This tends to coordinating
and integrating these flows within and outside the organization. An effective supply chain
management should have the intention in inventory reduction.

In supply chain management payment schedule one among the vital which used in payment in
fact that, payment schedule seems as the unique way to keep track of the dates when the payment
is required to be made by one party to another. Through one has to follow various steps in order
to make a payment schedule, such as, to determine the number of weeks in which payments are
to be made. In payment schedule if you are pay to more than one party then your payment
schedule must priorities your payment due to their insistence.

Payment schedule personally can be used in business contacts. When you’re using payment
schedule in supply chain management there is no any doubt because payment schedule makes
your payment process less chaotic and lets you make your payment in wastes rather than making
them calmly.
In order to make your payment schedule should list the frequency of payment be drafted to your
convenience, depending upon whether it is comfortable for you to make your payment weekly,
annually or monthly? (Sridhar tayur Ram Ganeshan, Michael Magazine (1999),

ILLUSTRATION Sales on credit Buyer

Seller MANUFACTURER: DISTRIBUTOR:

Processing and transforming Wholesaler, retailers and Agents

Prepares payment schedule

Also payment should point when the day when the payment is to be made after interval of time.
The best payment schedule is the one, which adjust the payment on the business days, if the
payment date does not come on the business day, you must use date rolling element. Date of the
first and the last payments should be mentioned in the payment schedule.

Apart from introduction, in supply chain management payment schedule can be implemented as
follows;

Through payment; A Prepayment is the settlement of a debt or installment payment before its
official due date. A prepayment can either be made for the entire balance of liability or for an
upcoming payment. A payment can be made by a single individual, a corporation or another type
of organization. A prepayment, on the surface, is the payment of a bill, operating expenses or a
non- operating expense that settles the account before it becomes due.

Through bill of exchange; A bill of document is a document used in international trade to pay
for goods or services. It is signed by the person promising to pay, and given to the person entitled
to receive the money. The bill may specify that payment is due on demand, or at specific future
date, this is most used in supply chain management in that case payment schedule act as the
written order to both part. Also through bills of exchange payment schedule used in financing the
trade but this occur after discount being made in requisition of credit.

Through Cheque payments; A cheque payment is a negotiable instrument drawn against

deposited fund, to pay a specific entity a specific amount of fund on demand. In supply chain
management, payment schedule implemented through cheque payment that in traditionally way
this originated from payer to payee. In this case funds are shifted from the payers account to the
payee’s bank in which the payment already applied. Furthermore in supply chain management
payment schedules is used as a cheque guarantee mechanism mechanism. Always merchants
tend to specify the amount which supposed to be guaranteed. Therefore cheques are used as
guarantee in supply chain management in specified amount.( Edith simchi Levi (2000),

Through milestone payment; Milestone payment are a very common scenario in Fixed Price
Contract, where a certain portion of agreed contract price is paid upon achieving the pre- agreed
milestone. Generally, this is tracked as a Fixed Cost at the Milestone Level, or Cost.

Through advance payment; An advance payment, or simply an advance, is the part of the
contractually due sum that is paid or received in advance for goods or services, while the balance
included in the invoice will only follow the delivery. In payment schedule this payment made in
which some portion of total price of a product made where by the remains amount will be pain
later after the buyer to confirm that the product contain some quality and awareness about the
product as expected.

Through Consignment sale; Trading arrangement in which a seller sends goods to a buyer or
reseller who pays the seller only as and when the goods are sold. The seller remains the owner
(title holder) of the goods until they are paid for in full and, after a certain period, takes back the
unsold goods. Also called sale or return. Also in another means, some commodities are given to
person (distributor) in order to sell them and the return of agreed amount will be made and
always distributor is only given the responsibility of sell the product from the stock and the
agreed payment will be returned to the owner which is producer.

Through promissory note; This is promise made by the person in which a person supposed to
sign when he/she made a promise to borrow the product from the seller that implies that the
payment should be made. As we know promissory note it occur when there is agreement
between the lender and borrower in which the borrower make a promise with the lender to pay
the specific amount what they were specified in a specific date.

Through Counter purchase; According to TID Institution Counter trade means exchanging
goods or services which are paid for, in whole or part, with other goods or services, rather than
with money. A monetary valuation can however be used in counter trade for accounting
purposes. In dealings between sovereign states, the term bilateral trade is used, or any other
transaction involves exchange of goods or services for something of equal value.

Conclusion; The payment schedule is not served until it is delivered in person to the claimant or
lodged during normal business hours at the claimants ordinary place of business or posted or
faxed to the claimant ordinary place of business or (as otherwise provided by the contract), so
that it reaches the claimant no later than 10 business days after receipt of the payment claim or
(such shorter period provided by the contract). The contract or common practices may provide
for other methods of service, such as email.
REFERENCES

David simchi levi, Philip kaminsky and Edith simchi Levi (2000), designing and managing
supply chain concept, strategies and case studies.irwin McGraw hill

Jeremy F Shapiro.(2001) Modeling the supply chain, Duxbury Thomson learning

Sunil chopra and peter meindel. (2002), supply chain management, prentice hall of India

Sridhar tayur Ram Ganeshan, Michael Magazine (1999), Quantitative Models for supply chain
management, kluwera academic publisher.