There are many different ways of making and receiving payments. Method Definition Advantage Disadvantage Cash Cash is the most commonly used form of payment day to day. Notes and coins are a quick and easy way to pay for goods. Once cash is handed over for goods or services transaction is complete. The business receives payment immediately Not as open to fraud as a cheque sums of money would have to be taken to the bank Can only sell direct to the customer and not by mail order or the internet Cheque A cheque is an instruction to a bank to take money out of the drawer’s account and put it into the payee’s account. Banks will guarantee a cheque up to a certain amount via a cheque guarantee card. A cheque takes approximately 5 working days to clear. A cheque takes 5 working days to clear so the business does not receive the money immediately If inadequate funds are in the account the cheque could “bounce” Some banks charge businesses for paying cheques into their account. Credit Cards Plastic payment cards that allows the cardholder to make payments. The cardholder borrows money up to a limit agreed. Interest is charged on money that is borrowed some charge an annual fee. Cardholders have to make a Easy method of borrowing money Accepted by many businesses in UK and abroad Sellers have to pay a fee for each customer that pays by credit card (approx 2%)
payment on their card each month. They can make a minimum payment or pay the full amount owed. Payment is delayed until the bill needs paying Interest charges can be very high Debit Card Similar in use to the credit card but Linked to a bank account so there must be fund before it can be used. Cannot be used to borrow Provides sellers with instant payment and is quicker than a cheque. Many businesses prefer to receive payments by debit card as there is no fee attached. Instant payment with no interest User must have the available in their account Direct Direct debit allows customers to pay regular bills automatically. A direct debit is an agreement under which a business selling goods and services can take money from the customer’s bank account. This amount can fluctuate, for example, a direct debit could be set up to pay for a fuel bill which is different every month dependent on amount of fuel used. Direct debits are free: buyers do not have to pay to use this method of payment Buyers do not have to remember to pay regular bills, direct debit does this automatically. Sellers know that they will receive payment on time. Sellers can save time and money, as they do not have to pay cheques into their bank account or send out invoices to customers. Standing Order Similar to a direct debit but the amount does not fluctuate. As This shows all the inflows (money coming in) and outflows (money going out). Total inflows = all the inflows added together Total outflows = all the outflows added together Net inflow/outflow = total inflow minus total outflow Closing Balance = net inflow/outflow plus opening balance Opening balance is the previous month’s closing balance
Automatically produce Financial Easy to update / modify Can out multiple copies Project revenues / costs Can be linked directly to ordering Stock though EPOS Drawbacks can include Initial set up costs for computer Training costs Can copy wrong formula Theft Power / Network problems This is due to the excellent teaching for Mr Gundhill when he was at TGS, as he remembered how to Produce Formulas Copy and Paste formulas Save his work Use tabs to work out different scenarios