To understand the role of payments in business, let us look at this example: When a dealer delivers a consignment in large quantity to a buyer, the buyer usually has an option of paying payments in parts. This might not be the case always, but hypothetically, considering the consignment is large and needs a lot of work by the dealer to manufacture the product in bulk. For this to happen the dealer must need funds to manufacture the products, before selling it for a said amount. This requires liquidity. So the dealer directly demands an advance payment at the beginning and the rest of the payment at the time of delivery of the consignment.
The initial payment or the advance money is used by the dealer to manufacture product/s, that he will eventually sell to the buyer. Although this is a standard practice, the dealer needs to write a formal communication requesting the same with the buyer.
This letter is called a ‘proposing payments in installments letter.’ This is a valid document, kept for future references by both the dealer and the buyer. This document must contain:
- Basic details of the dealer (such as name, address, phone and account number)
- Basic details of the buyer (such as name, address, phone and account number)
- Date of the request
- Details of request (proposing to pay (or get paid in parts every month)
- The actual purpose of the request (it is advisable, to be honest about the situation)
- This letter must also have communication of whether the buyer suggest any other options
- The letter should also address future plan of action and the agenda