Terms of sales are the different methods by which products are sold; this can be cash or credit. Below we look at some of these terms:
Cash includes bank notes, coins and also cheques, credit and debit cards.
– Instant payment in the case of bank notes, coins and debit cards
– Payment by cheques, debit and credit cards means less notes and coins in the business to attract thieves
– Cheques may bounce
– You may incur bad debts from credit card purchases
Depending on the business you are in, you may consider selling goods on credit.
This is a sale made where the customers would pay at a later date, sometimes making steady payments over a period of time. Hire purchase and lay-a-way plans are examples of credit purchases
– It gives your customers the chance to acquire products they want but cannot pay for all at once
– Helps to move stock
– Customers pay interest for hire purchased items
– Goods do not become the property of the buyer until payment of last installment
– You don’t get the use of the cash immediately
– In times of inflation the delay in payment means that the currency is depreciated
– You may incur bad debt
– Too much capital may be tied up in goods
With hire purchase sales the company hires the commodity to an intended purchaser, who usually pays an initial payment followed by series of installment until the total hire purchase price is paid. Hire purchase is mostly used for the purchase of equipment, household appliances and motor vehicles.
This is when customers make an agreement to pay for goods on installment. The goods remain with the seller until all payments are made.
CASH AND TRADE DISCOUNTS
You might find that your customers ask for discounts or you may decide to give discounts for a number of reasons such as bulk purchasing or prompt payment. Discounts basically fall into two categories cash or trade discounts.
Discount or allowance given to buyers for prompt payment or if a large purchase is made, the seller may give a certain percentage off the cash price.
Discount or allowance given to merchant or trader. A trader or merchant is anyone who buys goods for the purpose of resale; examples are wholesalers and retailers. The discount is actually the wholesale price and when goods are retailed it allows trader to make a profit.
The terms of sale chosen by a business can be influenced by a number of factors including the type and size of the business, cash flow and the market. It would be advisable to look at the options before and choose based on what you would consider to be the best option for your business.
If you seek assistance regarding terms of sales please don’t hesitate to contact us.
© 2011 Julian Gooden