Understanding Contract Payment Rules
When a harvest is completed, growers are paid for their products based on the terms of the contract. Each contract includes payment schedules with the payment terms that affect the final amount paid to contract payees or a contracting entity.
To simplify and easily maintain the different types of payment terms for contracts, you set up due date rules. With due date rules, you can set up multiple types of payment terms for advance, interim, and final payments. You can issue advance payments before you receive any product and after you receive a percentage of the product and before you issue interim payments. Oftentimes, you set up interim payments, for example, to pay a percentage of receipts after each fiscal period. You set up due date rules using the Due Date Rules Revisions program (P00146) and assign the rules to payment terms.
To issue multiple payments to a payee at different times throughout the growing cycle, you must set up advanced payment terms for installments and assign the payment term to each payee schedule record on the grower contract. If you issue one lump sum payment only to a payee, set up and assign a regular payment term instead.
The due date rules and advanced payment terms provide flexibility so that you can, for example:
Pay a fixed amount on a specific date.
Pay 45 days after a specific date.
Pay 20 percent of the contract after 30 percent of the product is received.
Pay 50 percent of the contract 45 days from when the product was received and the balance by a specific date.
Pay a certain percent multiple times.
For example, pay 25 percent of the total for each payment and spread the payments over four installments.
Pay 33 percent of the estimate harvest after the first month that the product was received and the remaining amount (67 percent) on a specific date.
You set up due date rules for payment terms using the Due Date Rules Revision program (P00146). You specify whether the payment for a due date rule is based on the quantity received or an estimated quantity. The systems stores due date rules in the Due Date Rules table (F00142).
If a grower is eligible for advance payment, the due date rule can further specify that payment is based on, for example:
A percent of the estimated harvest yield that must be received.
For example, a payee is eligible for an advance payment of 25 percent of the contract after total receipts reach 10 percent of the estimated harvest.
A flat or fixed amount and a specific date.
For example, a payee is eligible for an advance payment of 25,000 USD on June 12th.
After you set up due date rules, you set up advanced payment terms codes for installments using the Advanced Payment Terms program (P00145). The system stores installment records in the Installment Payment Terms table (F00144).