Cash discount for early payment or not

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Reference no: EM131158596

As a VP or Controller I am used to spending more than a little bit of time each week managing cash, and particularly to ensure that cash receipts are coming in as planned.  Customers make promises to pay and say "the check is in the mail" but maybe it is and maybe it isn't. 

QUESTIONS

1.  Should a business offer customers a cash discount for early payment or not?  Does it matter or not what kind of payment terms your competitors are doing?

>The customer has the option but not the obligation on each payment to take or not take the cash discount.  For example, a 1% discount offered to pay in 10 days instead of 30 days is setup in the accounting system as 1% 10/net 30.

2. What about setting up or asking customers to pay online with EFT electronic funds transfers or to use VISA/MC?Note that VISA/MC settles in 24-48 hours and is considered cash by the merchant and NOT credit.

Is this better or not and less expensive or not than waiting for and processing checks received via US mail?  Explain.

3. Do accelerated cash collection methods reduce the probability and cost of bad debt?  Y/N? Why so or not?

Reference no: EM131158596

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