What is Deferred Payment and How Does it Work for F&B Businesses?
What is Deferred Payment?
Deferred payment is a financial arrangement where a buyer can purchase goods or services and delay payment until a later date. In retail, this programme is often referred to as PayLater.
In this article, we will explore the different types of deferred payment, advantages, risks, and best practices for its implementation in F&B businesses.
How Does Deferred Payment Work for F&B Businesses?
In F&B businesses, deferred payment is becoming an increasingly popular option for restaurants, cafes and other food service operators alike to manage their cash flow and working capital.
Here's how it works: when a restaurant makes a purchase, the supplier is paid immediately by the deferred payment provider. This ensures seamless transactions. The restaurant then has a comfortable time window, typically 30 days, to reimburse the deferred payment provider, allowing them to prioritise operational needs without immediate financial pressure. This is a strategic financial approach that converts immediate payments into opportunities for growth and enhanced financial control.
Types of Deferred Payment
1. Instalment payments
Customers are given the flexibility to make payments for their purchases in multiple instalments, spread out over a predetermined period of time. This option provides customers with greater financial control and helps them avoid the burden of making a large one-time payment.
2. Delayed payments
Once customers receive the goods or services, they have the option to defer the payment for a specified duration upon agreement with the financing provider.
3. Partial payments
Customers have the option to pay for their purchases partially upfront and then repay the remaining amount over a set period of time.
The Latest Deferred Payment Product for F&B Businesses in Malaysia
Food Market Hub's Deferred Payment Plan is a new financing option that allows F&B businesses to pay their suppliers in cash for orders and repay the amount later to Food Market Hub. This helps businesses manage their cash flow and maintain a steady supply of goods for customers. It benefits both restaurants and suppliers in the F&B industry.
The financing programme offers a highly flexible repayment tenure. F&B operators can choose the repayment plan that suits their needs, with options ranging from as short as 4 weeks to as long as 12 weeks. This feature is particularly useful for restaurants that require a more extended repayment window. Moreover, the Deferred Payment Plan is designed to cater to all kinds of F&B operators, from small and cosy single-outlet cafes to large nationwide chains with over 50 outlets. The programme offers a negotiable credit limit that is tailored to each business’s needs.
Advantages of Deferred Payment for F&B Suppliers
1. Increased Sales
Deferred payment can increase sales by making purchases more seamless for customers.
2. Steady and Predictable Cash Flow
Deferred payment provides suppliers with a consistent and predictable cash flow, ensuring a smoother operation of their business without disruptions.
3. Reduced Receivables Turnover Time
Suppliers benefit from a shorter receivables turnover time as deferred payment allows for prompt settlements, minimising the time between providing goods or services and receiving payment.
4. Customer loyalty
Offering deferred payment options can be an effective way to build customer loyalty by providing them with more flexibility and convenience in their payment process.
5. Minimised Bad Debt Risks
The structured nature of deferred payment reduces the risk of bad debts for suppliers, contributing to a more secure and stable financial environment for their operations.
Advantages of Deferred Payment for Restaurants
1. Immediate Supplier Payments
Deferred payment allows restaurants to pay supplier invoices at a later time. This ensures a constant flow of essential ingredients and goods.
2. Longer Reimbursement Window
With a typical reimbursement window of 30 days or more, restaurants gain the flexibility to synchronise payments with their unique cash flow cycles; this helps reduce financial strain and facilitate smoother financial operations.
3. Potential Discounts
Embracing deferred payment positions restaurants to negotiate potential discounts from suppliers for prompt payments. This not only enhances profitability but also fosters stronger supplier relationships.
4. Strategic Cash Flow Management
Deferred payment is an effective way for restaurant owners to manage their cash flow and focus on their operational needs while delivering excellent dining experiences.
5. Financial Empowerment
Deferred payment is more than just a transactional tool; it can also catalyse financial empowerment in restaurants by providing a pathway to sustained growth and profitability.
Deferred payment is an excellent option for F&B businesses as it can offer significant benefits such as increased sales, better customer loyalty, and effective cash flow management. By following best practices, businesses can avoid potential risks and enjoy the advantages of deferred payment. For F&B business owners in Malaysia, exploring Food Market Hub's Deferred Payment Plan could be a worthwhile option.
Apply for Food Market Hub's Deferred Payment today
For further financial support and flexible solutions tailored to your needs, learn more about our financing programme; Deferred Payment Plan, or fill in the form below to be among the first in line to enjoy this product!
