Compare quotations using price, payment terms and collection risk

Make the transaction terms comparable

The quotations need comparable products or services, quantities, quality, delivery scope and tax treatment. If one includes additional installation, support, rework or return obligations, identify those differences before comparing the final price.

Check deposits, acceptance milestones, invoicing conditions, when the credit period begins, and customers' actual payment history. “Thirty days after invoice” and “thirty days after acceptance” need not produce the same receipt date. Put purchasing, payroll and outsourcing payments on the same timeline.

Credit terms should reflect the customer's ability to pay and existing trading history, followed by monitoring of actual collections. ACCA's accounts receivable management article discusses assessment before granting credit, clear terms and collection monitoring. This guide does not replace a review of the actual contract or customer creditworthiness.

Separate delivery economics from the funding period

Start with price less the relevant delivery costs for the order, then show financing and collection scenarios separately. Do not deduct financing again if it is already in the cost estimate. The remaining amount may still need to cover overhead and tax; it is not necessarily net profit.

For a short period with a fixed borrowing balance, a simple estimate is “amount actually financed × annual interest rate × days ÷ 365.” Staged expenditure, instalment receipts or different interest terms require a calculation using actual balances and the loan agreement. Annual sales are not an amount continuously borrowed.

A comparison of two quotations

Assume a service is completed on day 0 and the company pays CNY 70,000 of delivery costs that day, financed entirely by short-term borrowing. Offer A charges CNY 100,000, paid in full on day 30. Offer B charges CNY 103,000, paid in full on day 90. Scope and delivery costs are identical, and neither includes a deposit.

To isolate price and timing, the example excludes tax, other tax cash flows, shared overhead, borrowing fees and bad debts. Assume 12% annual interest on a simple 365-day basis, with principal and interest repaid when the customer pays. This is an illustration, not a loan quotation or a customer credit assessment.

Interest for A is CNY 70,000 × 12% × 30 ÷ 365. For B it is CNY 70,000 × 12% × 90 ÷ 365. Comparing the unrounded calculations, B leaves approximately CNY 1,619.18 more, rather than the full CNY 3,000 price increase.

This compares one order. B also keeps CNY 70,000 of principal tied up for another 60 days. With overlapping orders, combine their receipts and payments to check peak borrowing, available facilities and essential payments. A positive eventual result on one order does not prove adequate liquidity across the business.

What changes if payment arrives later?

If B pays in full on day 120, estimated interest under the same assumptions rises to CNY 2,761.64. The amount left is CNY 30,238.36: only CNY 928.77 above A with on-time payment. Actual borrowing may have additional terms if extended; this example does not establish that an extension is free of other costs.

Test delay and non-payment separately. If CNY 5,000 of B's price is never collected, that shortfall alone exceeds its normal-case advantage of CNY 1,619.18. The complete impact also requires recalculating receipt dates, outstanding borrowing and collection expenses. Prompt payment of a small earlier order does not establish that a larger order with longer credit is safe.

Without a reliable probability of default, retain explicit scenarios for on-time payment, late payment and partial non-payment. Do not insert an arbitrary bad-debt percentage to manufacture precision. A deposit, milestone payment or shorter credit period can be evaluated as another option using its own cash flows.

Turn the next quotation into workable terms

Define the return you need to retain and the funding you can support, then compare combinations of price, deposit and credit period the customer might accept. Cost informs the decision but does not guarantee willingness to pay. ACCA's practical pricing article discusses costs alongside customer and market conditions.

Keep the scope, payment triggers, expected and delayed receipt dates, funding source and remaining uncertainties visible. Actual contract terms and applicable requirements need their own review. To connect the order with payroll and supplier payments, see the cash-planning guide.

You can ask CaiGeek: “Compare these two quotations, including costs, payment terms and the effect of late collection.” The analysis should use the company's actual records and conditions. CaiGeek is an AI financial assistant for small and medium-sized businesses; see the official website for available capabilities and access. These numbers are illustrative, not a customer case or a promised return.