Acceptance Develops Sounder And More Serious Attitude Towards Buyer's Own Obligations

Buyers frequently allow their accounts to accumulate to such an extent that they find themselves at times in a very embarrassing position, which invariably places great hardship upon them. This is especially so under the open book account system, where the buyer, not because he wants to, but for the reason that the conveniences afforded by that system permit him to entail great credit responsibility, finds sooner or later that the practice is a very dangerous one. Where credit is extended in no definite amount and where it is easy to be obtained, a general tendency towards speculation sets in. It usually works out to the buyer's disadvantage.

The acceptance prevents the accumulation of over-due accounts and develops a sounder attitude towards the buyer's own obligations. He realizes his credit privileges, and takes care that they are always available to him in his business. It develops for him also, the tendency of regulating his business according to the extent of his assets. The acceptance, therefore, to the buyer, may not appear to be of advantage to him directly, but its use produces an indirect benefit, enables him to keep better tract of his outstanding obligations and avoids the evils of over-extension.

Acceptance Benefits Buyer By Reducing Price Of Goods

In a previous topic contained in the present chapter, one advantage was given accruing to the buyer from the use of the acceptance, as a means of settling his obligations, in that he offers the seller a better credit instrument which is worth something to him. The buyer, if he knows how to use this argument in making his purchases, will generally be able to obtain greater privileges than the buyer on open account.

The open account system of transacting business is accompanied by great evils which indirectly tend to raise the selling price of goods. For instance, the seller, due to the fact that losses are greater under the open account system, and that costs are higher as regards collection and account carrying, loss in interest, capital tied up and reduction in merchandise values, is forced to raise the price of his goods and must seek to get back this increase from no other source but the buyer. The seller knows that if he has a trade acceptance of the buyer in his possession, he is able to obtain funds at any time by discounting the paper. He knows also that the cost of conducting business due to the elimination of risk involved in the open account method is materially lessened.

It will invariably be found that the seller, therefore, is willing to show his appreciation of the acceptance method of settlement by affording the buyer a better consideration, which is usually a lower cost of merchandise. The large users of acceptances in this country offer buyers better selling terms, that is, a longer time within which to effect settlement in money by the trade acceptance method, knowing that thereby their capital is not tied up and could be made available to them at short notice. In other words, the buyer who buys goods on the open book account method, is paying for the inefficiency of that system. He has to pay, or the seller cannot stay in business. Therefore, anything that he can save the seller can be received as a concession by an "acceptance time buyer" just as well as by a "cash over the counter buyer."