RIGOROUS COUNTING: CHARACTERISTICS, USES AND EXAMPLES - ECONOMY - 2025

A rigorous cash purchase or sale is a payment term whose amount is covered immediately after the operation is carried out; that is, the merchandise is delivered simultaneously to your payment or even the payment is made in advance before delivery.

The rigorous or strict cash means that the payment of a service or product is instantaneous, immediate, what is popularly known as: "thundering and raining", "giving and giving", and so on.

It is the opposite of the sale or purchase on credit, where the money is paid within an agreed period after receiving the purchased merchandise.

In wholesale or retail businesses, different forms of payment are used. If it has been agreed that the payment is made upon receipt of the merchandise, it is said that the deal was rigorous in cash.

Under these conditions, the seller usually grants a discount, calculated on the total amount of the invoice, or on the total purchase.

characteristics

- It is the ideal option for any provider, although unfortunately few clients accept it due to their financial situation or little availability of cash at the till or banks.

- Helps protect the supplier from customer orders who are not very clear about their financial numbers.

- It is the simplest form in terms of administration, avoiding everything related to collections.

- Although it is more common to use rigorous cash in transactions of a small economic value, there are no impediments to doing operations with items that have high prices.

- You can improve the final sale price by offering discounts for the prompt payment made.

- With strict cash, money is never lost, as there is no risk that the client does not pay.

- The transaction is posted directly to the cash or bank account, rather than first posted as a bridge in accounts receivable.

- In the commercial environment there is what is called commercial cash. In commercial cash payment contracts, the seller grants the buyer a maximum period of 10-15 days - counted from the date of receipt of the merchandise - to cover the price. The seller may offer a cash discount if the buyer pays before the end of that period.

- When the payment term is greater than 10-15 days from the commercial cash, it is said then that the sale transaction was made on credit or on time.

Rigorous cash payment methods

Cash

It is the traditional form of immediate payment.

Check

The person who issues it establishes to the financial entity where the funds are deposited that the payment of the check is made to the person or entity indicated therein. The check can be settled by phone with the bank at the time of the transaction to guarantee payment.

Deposit in account

It refers to the deposit in the bank account of the beneficiary of an amount of money, in cash or check, made by a payer.

Wire transfer

The holder of a bank account carries out with this automated operation a transfer of funds to the account of another holder, either in the same bank or in a different one, which is physically in the same place or in a different one.

Credit cards

It consists of a private contract between the issuing bank and the seller. The financial institution agrees to pay the amounts and the merchant to accept payments with this instrument.

The seller pays a percentage to the financial institution on the amount of the sale made; on the other hand, the bank charges all the purchases made in the month from the bank account associated with the buyer's card.

Although the seller is collecting strict cash, for the buyer his payment to the bank is extended.

Debit cards

With these cards the cardholder can pay for their purchases. In contrast to credit cards, the purchase amount is immediately debited from the buyer's associated account. Therefore, the condition that you have a sufficient balance is necessary.

Situations in which rigorous cash is used

- In the business environment, rigorous cash is often used when starting a business relationship with an unknown client; It is used in the first transactions, while an eventual line of credit is evaluated.

- There are situations in a business relationship in which the customer may continuously fall behind in his payment or accumulate an amount of unpaid debt, exceeding the credit limit assigned by the seller; This can lead to mistrust of the client's financial solvency. It is decided to use the hard cash for future sales to that customer.

- It is also used in situations in which the selling company needs to increase its cash availability to improve cash flow and use it to maintain the operation, instead of having to apply for a bank loan.

- It is used if you want to avoid the collection process and all the expenses involved in managing accounts receivable: ability to evaluate, control compliance with credit line amounts, payments and collections.

- In highly inflationary or hyperinflationary situations, it is imperative to use strict cash as a payment condition, because money quickly loses its value. Therefore, the replacement cost of the items increases to the same extent.

- In economic recessions, confidence in clients' ability to pay is lost. It is very convenient to protect yourself with the rigorous cash.

Examples

With this payment condition, most transactions are carried out in commercial stores. In commerce, direct sales operations are mainly carried out, using the electronic point of sale as a tool. When the purchase payment is made, the merchandise is delivered immediately.

You can buy or sell in strict cash all kinds of products that are included in the commercial and services area: supermarkets, clothing stores, shoe stores, toy stores, gas stations, dry cleaners, car washes, parcels, etc.

It is also used in restaurants and fast food establishments, and is the preponderant payment condition in electronic commerce, both nationally and internationally. For example, you buy through Amazon and Ebay.

Likewise, its use in international trade transactions, making the payment before the delivery of the merchandise, either with the first presentation of documents or against the documents when the merchandise arrives at the destination port.

References

1. Debitoor (2018). Payment terms - What are the payment terms? Accounting glossary. Taken from: debitoor.es.
2. Venmas (2018). Negotiate payment terms. Taken from: venmas.com.
3. Susana Gil (2015). Cash. Economipedia. Taken from: economipedia.com.
4. Christian Gonzáles (2014). Sell ​​in cash or on credit? Arellano Marketing. Taken from: arellanomarketing.com.
5. Wikipedia, the free encyclopedia (2017). Cash payment. Taken from: es.wikipedia.org.