Arrangements that specify the contractual conditions of transactions between sellers and buyers for the sale of goods or services are known as terms and conditions of sale. In other words, these arrangements are the rules that govern the sales transaction. They include payment terms, which specify whether or not open credit is to be part of the sales transaction, the length of time for which credit is to be granted and other features such as discounts. Although this module will focus on payment terms, terms and conditions of sale also include other nonpayment conditions, such as warranties, return privileges and insurance coverage. From a legal standpoint, the words terms and conditions are interchangeable and will be treated accordingly in this module.
The impact of terms on an organization’s operations is significant. The granting of time for the customer to make payment represents a commitment of operating funds by the seller. Also, in most instances, the granting of open credit will permit the customer to receive product and/or services before payment is rendered. This situation increases the seller’s risk of loss in the event of customer insolvency or irreconcilable disputes. Both of these elements, the seller’s ability to finance its receivables and exposure to losses from bad debts or disputes, must be factored into the seller’s credit policies with respect to terms decisions.
After viewing this module, students should understand:
Toni Drake brings over 30 years of oil and gas credit experience to the table. Toni holds a CCE, NACM’s most prestigious designation. After earning her CCE, she went on to attend and excel at NACM’s Graduate School of Credit and Financial Management to further her education in the field of credit. Toni continues to support the credit profession as a speaker and instructor at events like NACM’s annual Credit Congress.