Industry sector:

Poultry farm: Payments to creditors


When you buy supplies on account instead of paying cash there and then, your suppliers are your creditors until you pay them. For maximum convenience you will probably aim to set up an account with each of your major suppliers which, depending on your type of business, might include:

  • agricultural merchants
  • feed merchants
  • specialist chick hatchers if you produce table birds*
  • manufacturers and distributors of agricultural machinery

* The expenditure on purchasing laying flock birds from specialist pullet rearers or establishing a breeding flock shouldn't be treated as 'Payments to creditors', it should be 'Capital expenditure' instead.

Setting up an account

To set up an account you may be asked to provide bank and trade references and until the account facility has been granted you will have to pay for your order at the time you place it. This is known as paying on a pro forma basis.

Once your account has been set up you will be invoiced at monthly or fortnightly intervals, and expected to pay within a certain number of days of receiving the invoice. (You may be able to negotiate a longer than average credit period - this will depend on the individual supplier.)

Discounts

You may be able to negotiate various discounts from your suppliers for:

  • paying your bill cash on delivery (COD), within a specified period, or paying by direct debit
  • buying supplies in large quantities

However, think carefully about these - you might prefer to pay a little more for your goods and have a longer credit period so that you have the chance to make some money from selling your produce before you pay your suppliers.

Checkpoints