Meaning
Provisions within a distribution agreement define the financial obligations and payment timelines agreed upon by a buyer and seller. These account terms establish the window for settling invoices and the penalties for late remittance. They limit the period during which a distributor can hold funds before transferring them to the manufacturer.
Settlement Timeline
Payments usually fall due within thirty or sixty days of the invoice date. Negotiated account terms dictate whether the clock starts upon the shipment of goods or their physical arrival at the warehouse. A shorter period benefits the supplier cash flow while a longer duration provides the buyer with capital for local marketing efforts.
If a shipment arrives damaged, the timeline might pause until the claim is resolved (which requires immediate documentation from the receiving team).
Credit Facility
Sellers often grant a specific monetary limit to buyers who maintain a clean payment history. This component of account terms determines the maximum value of outstanding orders allowed before the system blocks further shipments.
Penalty Clause
Interest charges apply to any balance that remains unpaid after the agreed deadline. This part of the contract acts as a deterrent against intentional payment delays. It remains active until the full amount plus any accrued fees reaches the seller bank account.
