Quick payment

Definition

Quick payment is the prompt settlement of an invoice or debt, often within a specified period. It usually involves taking advantage of early payment discounts offered by suppliers.

5 Must Know Facts For Your Next Test

1. Quick payments can improve a business's creditworthiness and relationship with suppliers.
2. Early payment discounts are commonly offered as incentives for quick payments, such as 2/10 net 30.
3. Quick payments can help reduce the cost of goods purchased due to discounts.
4. Maintaining adequate cash flow is essential for making quick payments feasible.
5. Quick payments may impact working capital management by reducing available cash but improving terms with vendors.

Review Questions

• What are the benefits of making quick payments for a business?
• How do early payment discounts like '2/10 net 30' work?
• What impact do quick payments have on working capital?

Related terms

Trade Credit: A financing arrangement where suppliers allow buyers to purchase goods or services and pay for them at a later date.

Working Capital: The difference between a company's current assets and current liabilities, crucial for daily operations.

Cash Flow Management: The process of monitoring, analyzing, and optimizing the net amount of cash receipts minus cash expenses.