Disincentive for delayed payment Essay Example

Typically, a time lapse exists between the receipt of goods and the payment rendered; however, this can differ. Customers who pay subsequent to obtaining merchandise are known as debtors. Measures exist to mitigate the adverse effects resulting from delayed cash flow.

Customers may not prefer having a clause in the invoice for interest payment on late payments. Instead, finance houses and banks offer factoring services where debts are purchased and a portion of the amount is provided upfront, with the remaining amount paid once the customer pays their bill. Usually, this is agreed upon between the customer and seller within a specific timeframe.

Accepting factoring typically involves a fee, as factoring agencies tend to evaluate a customer's credibility and reputation beforehand.

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Providing payment advances for input procurement may result in higher working capital requirements, so it's best to only do so when necessary. Creditors are individuals or entities that have provided the company with goods or services and are owed payments accordingly.

Sole traders must depend on their own funds and limit their use of borrowed funds, but there are several options for acquiring such funds.

• Mortgage
• Hire purchase
• Long term bank loans
• Overdraft

To guarantee all choices, the Sole Trader must offer assurance through utilizing resources within the business or their individual assets.

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