If when I purchase something I pay for it immediately why do companies/government/orgs after approving a transaction and/or receiving the work take 1-2months to pay for it?
EDIT: I am a new agency owner, so trying to figure out cash flow
EDIT 2: thank you guys so much for the detailed answers! Really helped me further narrow down the kinds of customers I do and don’t want to work with moving forward.
In: 2
Anyone in business is eventually passing on those costs to their customer. It is better if they can delay payment until after they have been paid.
As several folks have said, if I buy paint for a job, I don’t get paid for the job until I finish it. I’ll buy paint from the store that works with me to take their $$ after I get $$ from my customer.
This is true of lawyers, and clerical workers too. They buy coffee, envelopes, printer paper, staples, etc – ultimately their customer pays for all of that.
It isn’t essential to offer 30/60/90 days – but it can make a huge difference for a small business, or one with cash flow issues, or one that is capital intensive.
I’ll pay slightly more for paint on 90 day terms, so that store has an edge over anyone else in attracting painters like me.
(I’m not actually a painter – just using that example).
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