Payment terms for vendors

Started by PaulO3 • 7 replies • 314 views

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PaulO3 (Florida)
Posts: 5

Posted:

Hello all,this is my first post as a new member to HOATalk and also the President in a newly formed HOA. We as a board are researching the most beneficial procedure for paying invoices to our vendors. As a former businessperson we had and I'm familiar with 7 day,14 day 30 day, net 10 and net 15. Our management company has been paying vendors it seems 30 days in the forth coming month for services not yet received. Thanks for your input and look forward to participating in discussions in HOATalk.

NA1 (Massachusetts)
Posts: 190

Posted:

We prepay nothing except insurance or service contracts (eg 12 months service on something from a known vendor). Everything else is net 30.

BillH10 (Texas)
Posts: 1,217

Posted:

As a management company, we recommend to our clients they pay in full in advance of receiving the services only those contracts for which interest would be charged if the amount due is not paid in full when the invoice is rendered.

Association insurance policies are the only expenses which fall into this category I can think of on a Sunday morning after only one cup of coffee. There are probably others.

Some telecommunications service providers may bill in advance for the monthly fixed amount for service (that which is not based on usage during the billing period), that is their billing system process which has been in place for decades if not over a century. The key is no interest is charged unless the bill is not paid in full by the payment date.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Don't pay in advance

Guarantee they skip town and don't do the last month when there is a disagreement

vis ta vie

MichaelT21 (Arkansas)
Posts: 200

Posted:

Paul,

This is kind of a difficult question.

Vendors that invoice cost more than those that require payment at time of service, in general. We obviously ask vendors to invoice us for big projects ($1000 and up). However, for stuff under $1000, I've found much better prices by using my personal credit card to pay a vendor at the time of the service, and then submit documentation to the property management company for reimbursement.

Problem is, big checks are issued to me with my name on it, which gives the appearance that I'm collecting a paycheck from the HOA. This isn't the case but the optics aren't great. However, it does save the association money so folks really shouldn't be complaining about it. We get audited every year by an external auditor and a third party (property management company) reviews the receipts prior to issuing reimbursement. This year, I think I will ask two Board memebers to sign my expense report and have one of the other people submit it to our property management company for better financial controls.

For example: Our landscape contractor for a big project required that we buy a huge tarp to cover a concrete pad for protection. Why they couldn't do it, I don't know, but they refused and decided it was our issue to solve. I purchased a large tarp from a major online retailer (can't mention the name of the behemoth company). To save cost, I bought one "used like new condition" for 1/2 the price, and spread it out myself on the concrete pad. It cost us $100 and would have cost about $500 had we hired a vendor to take care of the request....so I was happy to do it to save a bit of money. But, I need to get reimbursed the cost because the big online vendor does not invoice our property management company.

NA1 (Massachusetts)
Posts: 190

Posted:

Quote:

Posted By MichaelT21 on 01/15/2023 8:18 AM
Paul,

This is kind of a difficult question.

Vendors that invoice cost more than those that require payment at time of service, in general. We obviously ask vendors to invoice us for big projects ($1000 and up). However, for stuff under $1000, I've found much better prices by using my personal credit card to pay a vendor at the time of the service, and then submit documentation to the property management company for reimbursement.

Problem is, big checks are issued to me with my name on it, which gives the appearance that I'm collecting a paycheck from the HOA. This isn't the case but the optics aren't great. However, it does save the association money so folks really shouldn't be complaining about it. We get audited every year by an external auditor and a third party (property management company) reviews the receipts prior to issuing reimbursement. This year, I think I will ask two Board memebers to sign my expense report and have one of the other people submit it to our property management company for better financial controls.

For example: Our landscape contractor for a big project required that we buy a huge tarp to cover a concrete pad for protection. Why they couldn't do it, I don't know, but they refused and decided it was our issue to solve. I purchased a large tarp from a major online retailer (can't mention the name of the behemoth company). To save cost, I bought one "used like new condition" for 1/2 the price, and spread it out myself on the concrete pad. It cost us $100 and would have cost about $500 had we hired a vendor to take care of the request....so I was happy to do it to save a bit of money. But, I need to get reimbursed the cost because the big online vendor does not invoice our property management company.

I would *never* do that. The optics are questionable, and it will always look suspect. There is no reason the PM cannot order the materials for you online.

An audit, if that's actually what you're having, is an assessment to see financial report reflects the position of the organization and is reasonably free from material misstatements. They're not checking every receipt, looking for fraud (though they may find it), are appropriate, stated controls in use, etc.

TimB4 (Tennessee)
Posts: 21,059

Posted:

We paid per the terms of the contract.

For trash/recycling we were billed at the beginning of the month.
For mowing, we were billed at the end of the month.
For adhoc contracts - we paid at the end of the job or how we agreed to in the contract.

SheliaH (Indiana)
Posts: 6,964

Posted:

I think it depends on the contract. For example, if the contract is for landscaping that starts in the spring, say, March, you could pay a small deposit now (no more than 15%) and then do monthly payments thereafter. Otherwise, pay a deposit a week or so before the work begins - no more than 20%, especially if it's a building project, then play another 20-30% as the work progresses.

Never pay the final balance until after you or the property manager have inspected the work, the work area is cleaned and the association has been released from all subcontractor liens (in fact, you should get something in writing saying no subcontractor liens are to be placed against the association BEFORE the contracts are signed).

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

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