Deferred billing is a method of billing in which buyers are do not charged with the interest even if they pay later than the due date of the purchase. The major advantage of deferred billing is that it helps in promoting the sales and results in the free marketing and promotion of the product. This technique enables the buyers to purchase large batches of products without making payment and they will be charged with no interest later when they will make the final payment. Companies dealing with luxury products such as car dealers provide their customers with the facility of deferred billing.
Retailers have two major advantage of deferred billing. One advantage is that it increases the buying power of the potential customers hence they are attracted towards buying large batches of the products secondly the customer develops an association with the product and hence this technique helps in marketing and the promotion of the product as well. However along with the advantages this technique also have a few disadvantages as well like it can make an income statement imbalance as there comes a difference in the revenue recognition of the company.
Sometimes the order is delayed for a credit buyer on the request of the seller itself in order to sale large batches of product. This is usually done when the product is new in the market and needs to get promoted. Due to its unique characteristics the method of deferred billing is also called as a type of sales promotion method.
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