payee n : a person to whom money is paid

English

Noun

payee (plural: payees)

1. One to whom money is paid.

A payment is the transfer of wealth from one party (such as a person or company) to another. A payment is usually made in exchange for the provision of goods, services, or both, or to fulfill a legal obligation.

The simplest and oldest form of payment is barter, the exchange of one good or service for another. In the modern world, common means of payment by an individual include money, check, debit, credit, or bank transfer, and in trade such payments are frequently preceded by an invoice or result in a receipt. However, there are no arbitrary limits on the form a payment can take and thus in complex transactions between businesses, payments may take the form of stock or other more complicated arrangements.

In law, the payer is the party making a payment while the payee is the party receiving the payment.

Payment methods

There are two types of payment methods; exchanging and provisioning. Exchanging is to change coin, money and banknote in terms of the price. Provisioning is to transfer money from one account to another. In this method a third party must be involved. Credit card, debit card, money transfers, and recurring cash or ACH disbursements are all electronic payments methods. Electronic payments technologies are magnetic stripe card, smartcard, contactless card and mobile handset. Mobile handset based payments are called mobile payments.

Parties involved

Payments may be classified by the number of parties involved to consummate a transaction. For example, a credit card transaction in the United States requires a minimum of four parties (the purchaser, the seller, the issuing bank, and the acquiring bank). A cash payment requires a minimum of three parties (the seller, the purchaser, and the issuer of the currency). A barter payment requires a minimum of two parties (the purchaser and the seller).

Payment providers

The infrastructure and electronic clearing methods are formed by the payment provider. Global credit card payment providers are Visa and Mastercard. Japan Credit Bureau, JCB is a payment provider for Japanese market. Maestro and Cirrus are international debit card payment providers.

Global payments market

In 2005, an estimated $40 trillion globally passed through some type of payment system. Roughly $12 trillion of that was transacted through various credit cards, mostly the 21,000 member banks of VISA and MasterCard. Processing payments, including the extending of credit, produced close to $500 billion in revenue.

Debit cards

In the U.S., debit cards are the fastest growing payment technology. In 2001, debit cards accounted for 9 percent of all purchase transactions, and this is expected to double to 18.82 percent in 2011

Checks

Historically, checks have been one of the primary means of payment for purchasing goods and services in the U.S. In 2001, checks accounted for 25 percent of the U.S.-based payment mix; in 2006, this is projected at 17 percent.

Determining actual payment for U.S. tax purposes

For tax purposes, it is important to determine the timing of actual payment and whether it qualifies as a deduction in a taxpayer's calculation of taxable income.

Cash payments occur at the time of payment. This is the easy case, but payments in other forms can be trickier. Payment also occurs when the taxpayer transfers property or performs services in lieu of making a cash payment. Payment by check is deemed to occur when the check is delivered, as long as the check is honored on presentation by the payee. Postdated checks, however, are not considered payment when delivered. Generally, payment by credit card occurs at the point of the sale and not when the taxpayer is billed by the credit card company or when the taxpayer pays the bill.

See also

• APACS (The UK Payments Association)
• Trade
• Financial transaction
• Money
• Accounting
• Commerce
• Business

Footnotes

References

• Schaeffer, Mary S.: New Payment World, John Wiley & Sons 2007
• Schaeffer, Mary S.: Controller & CFO Guide to Accounts Payable, John Wiley & Sons 2007
• Schaeffer, Mary S.: Accounts Payable & Sarbanes Oxley, John Wiley & Sons 2006
• Accounts Payable Now & Tomorrow newsletter http://www.ap-now.com
• e-AP News, free weekly ezine from Accounts Payable Now & Tomorrow http://www.ap-now.com/ezinesignup.html
• Accounts Payable Now & Tomorrow blog http://ap-now.com/blog/

accepter, acquirer, addressee, audience, auditor, beholder, consignee, getter, hearer, holder, listener, looker, obtainer, procurer, receiver, recipient, spectator, taker, trustee, viewer