A delayed receipt is money that was expected in one month and arrives in a later one. Exam questions may show a forecast and ask you to explain what happens to the business if a large customer pays a month late.
This lesson uses the table from constructing a simple cash forecast in cash flow and finance, and it feeds directly into proposing a case-specific action.
What is the shape of a good explanation?
A good explanation is a chain, where each step causes the next.
- The event: the customer pays later than planned.
- The immediate effect: less cash arrives in the month it was expected.
- The pressure: payments such as wages, rent and suppliers still fall due on their usual dates.
- The result: the closing balance drops, perhaps below zero.
- The consequence: the business may need an overdraft, may delay its own payments or may miss an opportunity.
A short answer that skips from step 1 to step 5 reads as an assertion. The middle steps are where the explanation lives.
How do you show it with figures?
Redo the forecast twice: once as planned and once with the receipt moved to the later month.
Compare the closing balance in each month. Note that the total over the two months is the same. What changes is the shape of the balance month by month.
Worked example
Dapur Selera Kuantan, a catering firm, expects to be paid RM24,000 for a corporate event 30 days after the event, in October. The customer instead pays in November. All figures are in RM.
As planned.
| September | October | November | |
|---|---|---|---|
| Opening balance | 4,000 | 1,000 | 16,000 |
| Cash in | 8,000 | 27,000 | 5,000 |
| Cash out | 11,000 | 12,000 | 13,000 |
| Closing balance | 1,000 | 16,000 | 8,000 |
October cash in is 24,000 from the event plus 3,000 from other customers.
With the payment a month late.
| September | October | November | |
|---|---|---|---|
| Opening balance | 4,000 | 1,000 | −8,000 |
| Cash in | 8,000 | 3,000 | 29,000 |
| Cash out | 11,000 | 12,000 | 13,000 |
| Closing balance | 1,000 | −8,000 | 8,000 |
Reading the tables. October closes at −RM8,000 instead of +RM16,000, a difference of RM24,000. In November the balance returns to RM8,000, the same as planned.
The explanation. The late payment means RM24,000 does not arrive in October. Wages, ingredients and rent still have to be paid, so the October balance falls to −RM8,000. Dapur Selera may need an overdraft of at least RM8,000 for a month or must ask suppliers to wait. The firm has not lost the money, because it arrives in November, but it has to bridge a gap.
The mistake to watch for
A common slip is to say the business has lost the money or made a loss.
Mistaken answer: “The late payment means Dapur Selera loses RM24,000 and its profit falls.”
The customer still pays in November, so no money is lost. Profit is unchanged, because the sale was already counted. Only the timing of the cash has changed.
The correction is to say “delayed”, not “lost”, and to name the month where the balance is affected. If the question mentions that the customer might never pay, then you may discuss a bad debt as a separate, more serious effect.
Check yourself
Try these on paper, then open each answer.
1. A workshop opens a month with RM2,000, receives RM1,000 from regular customers and pays RM4,500. A customer owing RM5,000 was due to pay this month but pays next month. Find the closing balance now, and what it would have been if the customer had paid on time.
Show answer
Now: 2,000 + 1,000 − 4,500 = −RM1,500. On time: 2,000 + 1,000 + 5,000 − 4,500 = RM3,500. The difference is the RM5,000 that arrived late.
2. Name two actions a business could take to reduce the effect of late-paying customers.
Show answer
Examples: ask for a deposit before the work starts; shorten the credit period; offer a small discount for early payment; arrange an overdraft in advance. Any two with a reason are acceptable.
3. True or false, with a reason: “A customer paying a month late reduces the firm’s profit for the year.”
Show answer
False. The sale is already counted in profit, and the customer still pays, so profit is unchanged. Only the cash balance in the month is lower.
Where this leads next
Once the chain is clear, go on to proposing a case-specific action with a limitation, which asks what the business should do about the gap. Then try the practice set. You can rebuild the example in the cash versus profit bridge by moving a payment to a later month and watching the balance.
If your explanations are correct but too short to earn full credit, our teachers can work through them with you in online one-to-one Business tuition.