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The development of a fitting trade credit policy: Determinants on payment time in the Dutch industrial B2B market

Hofstee, R.J.H. (2014) The development of a fitting trade credit policy: Determinants on payment time in the Dutch industrial B2B market.

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Abstract:In this thesis a research in the field of trade credit is conducted. The firm has no clear policy on granting trade credit to their B2B customers. The existing (non-written) policy is based on feelings and experience of salespeople and management. The firm seeks for a new trade credit policy that can be used to determine whether trade credit can be given to new customers. Existing literature is used to describe the reasons for giving trade credit: enhance information, reducing transaction costs, pricing, reliable financing and marketing and customer relations. Current developments show that more and more transactions are on credit. In prior studies multiple variables are found that affect payment behaviour by customers, the main variables are supplier size and type of customer. In our research we checked if these variables are also affecting the payment behaviour of the firms customers. The following variables were found to have effect on payment time: Number of employees, total assets, region, SBI-code, amount of invoiced value and length of relationship. In the new trade credit policy three variables are used to decide on granting trade credit, number of employees, customer type and SBI-code. In this policy also the range of payment terms, DSO-calculation, follow-up methods and responsibilities are described. This together leads to a tool that can be used on a daily base to decide on granting trade credit to (new) customers.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/66442
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