Finance Litigation
How should the customer firm respond to the prompt settlement offer?
A firm uses supplier credit for all of its purchases. In order to protect its goodwill and credit rating, the firm always settle its accounts payable by the due date. One of its suppliers issues invoices at the time of delivery and statements at the end of each calendar month. Statements are payable by the end of the following month. The supplier has recently introduced a prompt settlement discount of 1% for invoice settled within ten days of the invoice date. The customer firm uses a bank overdraft as its principal source of short-term finance. The bank of overdraft rate is currently 9% pa, with interest charged monthly. How should the customer firm respond to the prompt settlement offer?
Public Comments
- why does this cutomer firm need credit ? they should review their business practices to generate enough cash to have cash reserves.
