The 4 most effective email templates to follow up on outstanding invoices
Email is an incredibly effective tool for credit control. Here at Chaser, we’ve seen that ...
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For a financial transaction to be complete, there have to be at least two parties involved. One party represents the payer, or payor, while the other represents the payee.
This article intends to provide a clear distinction between the parties and also shed some light on the difference between payer and payor.
As mentioned above, for a financial transaction to be complete, there have to be at least two parties involved. Parties could either be an individual, e.g., a customer or individuals transacting among themselves, a public entity, e.g., a government body involved in a transaction, or a private entity, such as a business. Transactions between these three joint parties could be structured as follows;
Individual – Individual
Public entity – Individual
Private entity – Individual
Public entity – Public Entity
Public entity – Private entity
Private entity – Private entity
Transactions involve an exchange of value. Either of the parties could need a valuable good or service, and the other party is willing to provide the goods or services for a beneficial amount of money. In these scenarios, there has to be a payee and a payer or payor. It is essential to distinguish between the two during a transaction since a mix-up could lead to significant potential losses and unaccountability thereafter.
Payee refers to the party receiving the token of money or the agreed upon mode of exchange for a good or service that they have offered when an invoice is being cleared. The payer or payor is the party making a financial settlement or any other settlement agreed upon after receiving a good or service. When drafting an invoice, a mix-up between the two parties could lead to further financial mixups and even losses.
Payer and payor refer to the same party member, the one making the payment. They, however, draw a slight difference in their spelling and, more often than not, in the context in which they are applied. Payor is often used in legal work documents, while payer is used in other official settings.
A payer or payor is the party offering payment for consuming or anticipation of consumption of a good or service. Payers are on the receiving end of the valuable goods or services, and in turn, they issue money. A payer could be a shopper purchasing goods and services or anything bestowed value upon, someone settling their mortgage bills or a taxpayer paying their tax. From a credit point of view, the debtor is the payer, given that they are required to settle the debt.
A payee offers a good or service in exchange for receiving a financial or non-financial settlement for it. This places the payee on the receiving end of goods and services but on the offering end of services. A payee could be the government when fines or taxes are being paid, a construction agency that has delivered material, or a taxi driver who dropped off a client. The payee often issues the invoice. From a credit point of view, the creditor is the payee.
A payment is an agreed settlement between a payer and a payee for a good or service offered. It is the conjoining link between the payer and the payee. A payment balances the equation after a good has been sold for everyone to gain. Payments could be made in cash, cheque, bank transfer, direct debit, or electronic payment. Chaser will help automate payment collection, minimise the resources used when following up on payments, and help sustain a fair cash flow.
Transactions involve an exchange of value. An exchange of value could be;
Courts provide rules for fine payment by the offender to the victim of the offence as a means of settlement. In this setting, the offender is the payer, while the victim of the crime is the payee. In court, either of these parties could represent the state (public entity).
We pay for the goods and services we consume as agreed with the good or service provider. The recipient of the goods or service is the payer as they hand out a financial settlement for the goods, while the payee is often the party issuing the invoice or simply offering their services or selling their goods. Here, whether services are provided on credit or in cash does not determine the payer and payee.
Chaser as a brand aims at helping Small, and Medium Enterprises (payees) receive their settlements promptly and improve their cash flow. Chaser is focused on reinventing the way payers, and payees view payments. Chaser aims to make the payees' chase for payment from the payer comfortable, simple, and quick.
Citizens are obliged to pay taxes to their governments, and the government is obliged to avail services to citizens. This facilitates a transaction where the citizen is the payer, and the government is the payee. Citizens pay for services, and governments receive payments for services rendered.
A business or firm may acquire goods or services, and they would have to pay for them. For instance, an organisation's premises could acquire cleaning services from a cleaning agency. As they finalise their transaction, the firm will pay funds to the cleaning agency to settle for the services rendered. This would make the firm the payer, and the cleaning agency would represent the payee.
This is among the areas where one needs to be most careful because a slight mistake could easily go unnoticed for a longer period and consequently lead to losses. Bank transactions require an account number for both the payer and the payee. The account from which money is wired often represents the payer, whereas the account into which money is wired often represents the payee. Mixing up their account numbers or using an entirely foreign account number is very common. This breeds unaccountability, thus requiring keen attention while differentiating between the two.
The firm organisation representing the employer is the payer, as they reward the employee for services delivered to the firm either by direct deposits or by drafting a check. The employee receiving the payment or the cheque is the payee. It is also essential to distinguish between the payer, the payee, and the holder of the bond or promissory note, as this determines who can properly utilise the funds.
In the same context, investors pay financial institutions money for their stocks and get stock shares in return. From this aspect, the payer becomes the investor, and the financial institutions become the payee. These scenarios are controlled by who is issuing out the cash and who is receiving it.
It may seem easy to distinguish between a payer or payor and a payee, but it can often be puzzling. In some scenarios, like on bonds, bills, and promissory notes, the law clearly states who has the right to the funds represented on the bill. The payer and the payee have to be indicated when making payments to avoid confusion, which could also breed mistrust among business people, mistaking the error for a fraudulent attempt. It is essential to cross-check these features during payment.
Chaser is out on a mission to ensure the payee within a business structure receives their payment efficiently and comfortably. In this way, payees are guaranteed to be settled in the transaction, which stands to improve cash flows and protect brand and client relations.
With Chaser's help, Glaze Digital, a marketing agency from Belfast was able to spend more time focusing on growing their agency and improving customer relationships and less time on chasing their customers for money. And, after partnering with Chaser, they are getting their invoices paid 24 days faster.
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