Y company offers its customers credit of 2/10,n 30. Most customers take advantag

Question

Y company offers its customers credit of 2/10,n 30. Most customers take advantage of the cash discount, mailing their payment to arrive on the 10th day following the date of the invoice. However X comany, Y largest customer, has recently begun sending payments to arrive on the 30th day after invoice, while still taking the 2 percent discount. Y company colletion department has been in toch with X company regarding the taking of the discount outside the discount period ,and X company response is that it deserves to take discount whenever payment is made. After all, it is Y company biggest customer. Identify Y company possible courses of action as well as the consequences of these actions

Explanation / Answer

There are a few different actions Y can take. Below are my personal thoughts regarding each of them. 1. Stop offering the discount to all customers. This could cause a decline in the amount of business that Y does. Existing customers who are complying with the terms will be upset that the discount is no longer available and will probably stop placing orders. 2. Add the amount of the discount Company X takes to the next invoice. This will most likely anger Company X and could possibly make them stop doing business with Y. However, it might also show Company X that they are not allowed to take the credit. 3. Contact the President/CEO of company X and explain the issue. This might force the accounts payable department to stop taking the credit when it is not due.

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