For businesses of any type small or big size, managing a cash flow is very important, particularly, receiving payment from customers before due date. Most of the businesses have problems receiving on-time payment, even with their old customers and hence, they need to send many request letters to get paid after the due date. Thus, sometimes it becomes very difficult for them to properly manage fund for their important work. In such a case, businesses need to find a middle way to allure their customers to make their payment on time. Yes, it is possible by offering them early payment incentives.
All about Early Payment Incentives and Its Key Benefits
With early payment incentive or discount offer, you can convince your customers to give payment on time. When you give credit on purchase to your customers, you have already mentioned all details such as invoice date, due date, due amount and more. Normally, most businesses give 30 to 60 days credit limit to their customers to make payment. Early payment incentive (also known as sales or cash discount) is a discount that is given by businesses to their customers on their purchases. It offers to only those customers who give payment before due date. It is a special offer by companies in order to get their payment on time and keep their cash liquidity up-to-date.
Early Payment Incentives give many benefits such as
- To get an advantage of your cash discount offer, you need to explain the details in your sales offer. This also helps you to attract other customers to take benefit of this special scheme. You can also mention the discount in the sales invoice. It will keep customers cautious about making an early payment.
- It helps your businesses to reduce the risk of late payment or nonpayment.
- This special offer helps you to get your money in time. Thus, you can increase your working capital as well as stay confident to make payment to your vendors/suppliers or pay loans, if any.
- In order to maintain liquidity of money, receiving early/on-time payment from customers gives significant benefits to your business which can be possible by this offer.
- With regular discount offer, you can please the customers that help you in building a good reputation for your company as well as strengthen the relationship with your customers.
For offering an early payment discount, you need to get a consultation from an expert accountant who can guide you precisely. Your offer should not affect your profit margin. Hence, you need to consider some major aspect, such as common discount offer by most of the businesses, customer’s past history for making payments, your profit goals and many more.
If you are looking for an expert and reliable accounting service or accountant in Melbourne, you can contact us at enquiry@www.pndaccountants.com.au.
