The arrangements between buyer and seller as to when payments for merchandise are to be made are called credit terms.
What are the terms of credit?
Credit terms are the payment conditions specified on the invoice at the time of the purchase of the goods. This is an agreement between the buyer and the seller regarding the deadlines and methods of payment for products obtained on credit. It also goes by the name "payment terms."
Influences on Credit Terms
- Time Issue: In this case, the seller is giving the consumer a time benefit and anticipates that the bill will be paid before the due date. Usually, the deadlines are established in advance of the transaction.
- Credibility Element: The amount of credit you extend to your consumer relies on how creditworthy they are. This may be determined by the number of transactions, the ability to repay, past performance, etc.
- Rate of Interest Factor: Sellers do charge interest, either for the entire credit period or just for the overdue time, depending on the quantity and credit duration.
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