This article provides general information, not legal, regulatory or financial advice. Requirements depend on the applicable contract, authority and jurisdiction.
Key takeaways
- Compare equivalent fuel and delivery scope before analysing payment terms.
- Ask finance for the relevant funding assumptions and available capacity.
- Identify the event from which the credit period runs.
- Keep financing arithmetic separate from counterparty and payment-security checks.
Confirm the same local supply proposition
The official 2018 APBA supply notice refers to tanker-truck and barge delivery arrangements. Spanish official notice
The historical notice does not confirm current service access or a supplier's payment policy. The comparison needs the actual accepted arrangement, with applicable current requirements reviewed by the responsible parties.
For a current transaction, the payment comparison is not provided; obtain current verified information. Record the equivalent purchase scope, payment dates, finance-approved assumptions and availability of any required facility.
Define when each payment becomes due
A credit period needs a starting event, not only a duration. An offer may refer to delivery, invoice issuance or another expressly agreed trigger. Those descriptions can create different cash dates even when the nominal period is identical.
Read the actual terms and confirm how amendments or delayed documents affect the due date. Do not assume that an internal invoice-approval delay automatically extends the supplier's agreed payment period.
Where the interpretation is disputed, check the current agreement and obtain appropriate advice. The comparison should expose uncertainty instead of quietly choosing the date that makes one option look better.
Use the buyer's actual funding constraint
Finance should identify whether an advance would use available cash, an existing facility or another authorised source. The relevant comparison may include financing charges, facility availability and the effect on other committed purchases.
Do not assign a market borrowing rate without evidence or assume that every buyer faces the same cost. The illustration below uses a deliberately fictional simple assumption to show the method.
A funded option is not executable merely because a spreadsheet gives it the lower total. The required money must be available on the relevant date, with the payment authorised through the buyer's normal controls.
Illustrative advance versus credit comparison
ILLUSTRATIVE — fictional equivalent Algeciras offers and finance assumptions, not available prices or borrowing terms.
An advance-payment purchase costs $300,000. An equivalent credit purchase costs $303,000 and shifts payment by 30 days. Finance supplies an illustrative simple annual funding rate of 8%, using a 365-day basis and ignoring fees and compounding.
Funding expense for the advance is $300,000 × 8% × 30 ÷ 365 = $1,972.60, rounded. The funded advance total is therefore $301,972.60.
The credit purchase is $1,027.40 more expensive on this simplified basis. That difference does not assess supplier risk, facility restrictions, administrative expense or the buyer's need to preserve liquidity for other commitments.
The result is a scoped comparison, not a recommendation to borrow or prepay. Finance must replace the assumptions with the applicable structure and assess whether either option is actually available.
A payment-term comparison table
| Input | Confirmation required | Why it matters |
|---|---|---|
| Equivalent purchase | Same accepted product, quantity and service scope | Isolates the payment-term difference |
| Advance date | Amount and condition for release | Defines the early cash requirement |
| Credit trigger | Agreed starting event and due date | Establishes the actual deferral |
| Funding model | Applicable rate, fees and day basis | Avoids invented financing cost |
| Facility capacity | Authorised availability at payment time | Determines whether the option is executable |
| Counterparty exposure | Approved seller and settlement assessment | Prevents price arithmetic replacing risk review |
| Payment details | Independently verified authorised instructions | Keeps settlement tied to the accepted transaction |
Fictional case: the attractive credit period starts earlier
A fictional buyer compares an advance offer with a credit offer described in a short quotation summary. The desk assumes the credit period starts after invoice approval.
Review of the proposed terms shows a different agreed trigger. The actual payment date is earlier than the buying model assumed, reducing the deferral benefit.
The desk corrects the comparison and asks finance to assess the real cash dates. It also checks whether the credit purchase uses a limited facility needed for another committed vessel call. The resulting decision reflects both total cost and usable funding capacity.
Reconcile the chosen terms after delivery
Once the buyer accepts an offer, carry its payment basis into invoice review. A later invoice date should not silently rewrite the agreed trigger, and a delivery amendment should be assessed for any effect on the actual payment obligation.
Keep disputed commercial items separate from the factual cash forecast. Finance needs to know both the asserted due amount and the authorised response, without assuming that an unresolved query automatically changes the contract.
Common mistakes
Avoid comparing different service scopes, assuming all credit periods start with invoice approval and using an unsupported financing rate. Other errors include ignoring facility capacity or allowing a favourable cost model to bypass payee verification. Payment economics and settlement controls answer different questions.
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Educational information only; not legal, financial or trading advice. Contract wording and applicable rules control. Verify current requirements and obtain qualified advice before acting.
Frequently asked questions
Is the lower advance price always better?
No. Include applicable funding cost and assess whether the required cash is available when needed.
Does a stated credit period establish its due date?
Only when its starting event and relevant terms are understood.
Can the example's funding rate be used for a real purchase?
No. It is fictional; finance must provide the applicable assumptions and model.
What belongs in the payment-comparison slot?
Record the accepted scope, actual cash dates, funding assumptions and authorised capacity assessment.