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“…which might skyrocket the behavior of humans who tend to perceive “long-lost” purchases as surreal”…
What if:: If the company bills the customers in the month following the month of sale, collections would be delayed by one month precisely.
I write on my own by my hand!
What if a company moves billing to the next month.
The points noted::
No collectables will be available in the month of sale; only the next month.
Cash collection schedules move to the next month. So, if 70% of receivables were in the month of sale, now the situation unfolds precisely one month later. Bills will be sent, but collected next month.
The collection schedule shifts, ergo cash flow is reduced in the month of sale and increased in the subsequent month of billing.
There will be outstanding receivables and money will be owed longer, which might skyrocket the behavior of humans who tend to perceive “long-lost” purchases as surreal and do not like to reimburse them.
Long overdue obligations become out of sight when money is owned for a prolonged period of time — people may psychologically “disconnect” from the debt. The purchase of water may seem distant and almost surreal because it feels like it is less urgent and even long-lost.
It is called the “Out of Sight, Out of Mind” effect. If bills come after some time, customers may downplay their importance or even existence. Digital invoices might be ignored, so if the water company does not send bills physically, this psychological trick might come into play.
Overall cash collections would not reflect the current state as it requires an immediate billing, which is restricted.
This delay would increase the cash receivables and reduce cash at hand, which is potentially harmful for liquidity and operational funding.
Liquidity strain is a serious concern as there might not be enough cash to cover operating costs. These delays can be managed by forward budgeting and reserved funds in the worst case scenario when there is a cash gap.
All in all, delaying collectables in one month may suffocate liquidity and potentially lead to bad debt risk (where no cash can be collected due to customer’s insolvency).
To be continued on my juicy ♦️ASAP| Business English Hunger Telegram channel…
You do you, do it ASAP.
1 минута
12 октября 2025