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Firms offer accounts receivable terms as an incentive to get customers to buy products from their...

Firms offer accounts receivable terms as an incentive to get customers to buy products from their firm rather than a competing firm.

What does this mean? Does this really stop customers from buying from the competition?
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Answer #1

Accounts receivable terms can also be known as selling products on credit or offering a payment term which is more comfortable for the buyer.

For instance, if a customer wants to buy a mobile phone worth $500, he/she needs to pay $500 first and take the product.A firm might offer him an option to pay 10% of $500, which is $50 upfront and the balance 90% - $450 in the next 60 days. This would make the purchase affordable for the buyer and conclude a sale for the seller firm.

This may or may not stop customers from buying from competition, however it makes buying easier for customers. Accounts receivable can be one of the factors which can help companies in selling their product. There are firms who offer upfront discounts, loyalty programs, reward points etc on purchase to buy products from them.

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