For Projects/services/supply of goods which takes Short-Run to complete

For Projects/services/supply of goods which takes Long-Run to complete

Putting a strict debtor credit period (e.g. 30

days) and Interest provision p.m. for Payment

after credit period given

For projects which takes long time to

complete and results in late realization from

debtors, projects milestones could be set to

make a progressive payment

For payment prior to credit period, provide

cash discount @ a percent which is less than

the cost of borrowing

For projects which takes long time to

complete, there could be a retention money

clause to overcome the risk of bad debts

Following could be analyzed :

Credit period allowed by creditors should be more than the working capital cycle

e.g. Working Capital Cycle = RM------>F.G.------>Debtors------->Debtors realization

7 days 10 days 20 days

So, the credit period should be =7+10+20 days = 37 Days

If the credit period could not be more than working capital cycle, the cash discount may be

demanded.

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