Attached is the original contract from Module 2 Case Assignment. Instructions are to add more to the contract in accordance with Chapter 2 (attached). Relate this module’s concepts and principles to the contract you developed in the Module 1 and Module 2 Case Assignments. Now add a more refined payment plan in this contract. Think about the following components and try to incorporate as many of them as possible into your contract. The components are: Timing Many customers prefer to pay on completion and acceptance of all work. Ideally, the delivery organization would prefer to be paid in advance to avoid having to finance negative cash flows. The reality is that the parties usually negotiate something that is fair and reasonable to both sides. Most customers are accustomed to pay within 30 days of an invoice. Be aware that some customers stipulate that payments be tied not to receipt of the invoice but to acceptance of the invoice. This can extend final receipt of payment for several weeks or months. Payment Schedule If customers cannot pay the lump sum at one time, you may offer a schedule for payment. You may specify how many bills the customer will receive and what the rates (usually higher) are under this plan. Invoicing Process You may want to specify when the customers will receive the invoices and how many in total they will receive. Substantiating Documents Make sure that the method of payment defines the substantiating documentation required to accompany each claim for payment. Where possible, the delivery organization should propose that such substantiation will be maintained within its organization and made available for inspection by authorized customer representatives should the need arise. Attaching the actual support documents to an invoice can be extremely time consuming and can result in delays in invoicing customers. Holdbacks If there are holdbacks applicable, understand when and how they will be paid. It may be desirable and reasonable, for example, to suggest that accumulated holdbacks be liquidated on completion of major milestones for long-term contracts. Interest Charges The method of payment should define when interest on outstanding payments will be payable and the rate at which interest is to be calculated.
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