Industry sector:

Fencing contractor: 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. 'Payments to creditors' are the payments you will make every month or so to your major suppliers of fencing materials and other goods and sundries that you purchase.

For maximum convenience you will probably aim to set up an account with each of your main suppliers, who might include specialist fencing manufacturers and distributors, timber merchants, agricultural suppliers and landscaping and builders' merchants. You might use some online suppliers if their prices are competitive and the service they offer is good.

You might decide to stick with one or two main suppliers, or you may prefer to shop around regularly for the best deals. Some of your main suppliers may offer you discounts if you purchase certain items in large quantities.

Enter in your cash flow forecast the payments you will make to your creditors (including VAT) in the months in which you will pay them.

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 or on delivery (possibly with an up-front deposit). This is known as paying on a pro forma basis.

Once your account has been set up you will normally be invoiced at monthly intervals and expected to pay within a certain number of days of receiving the invoice.