Distribution of Payments, Discounts For Early Payment, Factoring

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Distribution of payments

  • Businesses need to make sure their cash outflows are in time with their inflows.
  • Planning out payments and ensuring that you will have enough cash to pay creditors is essential.
  • This will ensure liquidity.

Discounts for Early Payments

  • Some businesses offer a cash discount if customers pay before their payment is due as it improves cash flow.

Factoring

  • Factoring is the selling of accounts receivables for a discounted price to a finance or specialist factoring company.
  • The business saves on the costs involved in following up on unpaid accounts and debt collection.
  • This is an important source of finance because the business is receiving immediate funds to use and therefore helping their cash flow.

Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.