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What are Prox Payment Terms?

QUESTION:

What is the idea behind a prox payment term? What is the use case for it?






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Re: What are Prox Payment Terms?

SOLUTION:

 

The Prox Payment Term option lets you define the day of the month for the invoice to be sent, the payment interval before the due date (in months), and the day of the month on which the due date occurs. It is useful if you want to limit the number of due dates to one per month.

Prox is a term from the retail industry which means "next of month." Invoices that do not meet the designated "cutoff" date for one month, would be paid in the next month. 

 

To further explain how prox payment terms works, let's set up the following requirements:

 

1) All invoices due on 1st of the month
2) All invoices due 1 month from the invoice date
3) Designated cutoff date is the 15th of every month

 

  • If the Invoice Date is June 10th, 2016, since the invoice date is BEFORE the cutoff date of the 15th, the payment will be due on upcoming 1st of the month = July 1st, 2016.
  • If the Invoice Date is June 22nd, 2016, since the invoice date is AFTER the cutoff date of the 15th, the payment will be due on following 1st of the month = August 1st, 2016.

 

Use Case:

As standard practice, a business will give a discount if a payment is received prior to a month from the invoice due date. Businesses provide discounts to improve their cash flow and their ability to repay debts or to fund payroll.

Seasonal businesses often have extended invoicing terms with their customers. This encourages customers to take shipment of products prior to when they will be able to resell them.

 

 

REFERENCES:

Define Payment Terms: https://knowledgecenter.zuora.com/CB_Billing/Billing_Settings/Define_Payment_Terms






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