What determines a vendor's payment due date, discounts for early payment, and penalties for late payment?

The payment due date, discounts for early payment, and penalties for late payment are all governed by Accounts Payable (AP) terms. AP terms define the specific conditions and timelines related to payments for services or goods received from vendors. This includes details such as the timeframe in which payments must be made (e.g., "net 30 days"), early payment discounts (e.g., "2% discount if paid within 10 days"), and any penalties associated with late payments.

AP terms are essential for maintaining positive vendor relationships, optimizing cash flow, and ensuring compliance with contractual obligations. By clearly specifying these terms, organizations can effectively manage their cash disbursements and improve their negotiating power with vendors.

While AP policies and vendor agreements contribute to the overall financial governance and expectations around vendor transactions, AP terms specifically focus on the mechanics of payment timing and conditions. Payment settings might pertain to the technical configuration within accounting software, but they do not inherently define the terms of payment itself, which makes AP terms the correct choice in this context.