Advance Payment Research Articles

PAYMENT PROCEDURES UNDER FIDIC CONSTRUCTION CONTRACT

Payment provisions are of crucial importance to contractors. Owner’s payments are the life blood of the contractor's work. Contractors and owners must understand the provisions governing all types of payments for a construction project. This paper presented an analysis of payment provisions under the FIDIC Conditions of Contract for Construction (2017 Redbook). FIDIC conditions of contract for Construction are widely used worldwide, especially in the middle eastern countries. The analysis includes: 1) Advance payment; 2) Interim payments; and 3) Final payment. The analysis reveals that FIDIC conditions of contract recognizes the importance of timely fulfilling of payment obligations of the owner and includes precise procedures and serious consequences for delayed payments. The contractor can take serious actions in response to delay in certifying payments or delay in receiving the certified payments, including suspending the work and/or terminating the contract after giving written notice to the owner regarding the intended action. Such notices should follow the stipulated time limit for each action depending on the type of delay. The analysis presented in this paper should prove to be useful to owners and contractors alike and can contribute to reducing disputes between the contracting parties.

Whether Expenses Can Be Demanded as Advance Payment in Performance by Substitution in Construction Contracts

İkame yoluyla ifa, borçlu tarafından ifa edilmeyen borcun alacaklı tarafından borçlunun yerine gerçekleştirilmesini ifade eder. Esas itibarıyla yapma borçları bakımından söz konusu olan ikame yoluyla ifa, eser sözleşmesinde TBK m. 473/II hükmünde düzenlenmiştir. Ancak eksik ve ayıplı işler bakımından bazı hallerde genel hüküm niteliğindeki TBK m. 113/I hükmünün uygulanması da söz konusu olabilir. Uygulanma şartları farklı olmakla birlikte, her iki hükme bağlanan hukuki sonuç aynıdır. Buna göre ikame yoluyla ifa, borçlunun hesabına gerçekleşir. Eser sözleşmesi yönünden bu durum, ikame yoluyla ifanın masraflarının borcunu ifa etmeyen yüklenici tarafından karşılanmasını ifade eder. Bu yönde ikame yoluyla ifaya giden işsahibi, ikame yoluyla ifa gerçekleştikten sonra ortaya çıkan masrafları yükleniciden talep edebilir. Ancak işsahibinin ikame yoluyla ifanın öncesinde masrafları avans olarak talep edebilip edemeyeceği hususunda ilgili hükümlerde açıklık yoktur. Bununla birlikte özellikle hakkaniyet düşüncesinden hareketle, borcunu ifa etmeyen yüklenici karşısında işsahibine masraf avansı talebi tanınmalıdır. Burada işsahibinin ikame yoluyla ifanın finansal yönden güvenceye alınmasındaki menfaati de göz önünde tutulmalıdır.

A Sustainable Advance Payment Scheme for Deteriorating Items with Preservation Technology

Profitably managing inventories is always a big challenge for retailers in the current context of transparent and competitive business. A general retailer always needs to handle both deteriorating and non-deteriorating products simultaneously to run a business. Deterioration of products sometimes impacts a retailer’s profits badly—a situation which can be alleviated by implementing proper preservation technology. In addition, to improve profits and minimize costs, a retailer always seeks some credit facilities (e.g., advance payment, trade credit facilities, etc.) from the supplier to continue the business smoothly with minimum investment. Advance payment is renowned for preventing the possibility of business orders being canceled and helping the retailer to minimize the risk of investing significant amounts at a single time. The foremost objective of this research is to analyze the facilities of advance payment and preservation technology investment and concurrent attempts to deal with shortages. This study shows that, given the presence of preservation technology, the result of case II is 68.06% higher than that of case I, whereas when preservation technology is absent, the result of case II is 71.93% higher than that of case I. The managerial insights of this analysis reveal that preservation technology attempts to prolong product life by preventing deterioration, which contributes to the retailer’s profitable business. On the other hand, in the case of an advance payment scheme, although the costs are relatively high, the study emphasizes the importance of the advance payment facility as it limits the risk of order cancellation and makes business more flexible for both supplier and retailer. The proposed model is solved by the classical optimization technique. Some theoretical derivations with numerical analysis support the model and provide some managerial insights for practitioners.

Financing Disruptive Suppliers: Payment Advance, Timeline, and Discount Rate

This study considers a dyadic supply chain in which a large and creditworthy buyer procures a product from a capital‐constrained supplier subject to disruption risk. In facilitating the production, the buyer may offer direct financing to the supplier by way of advance payment (AP). Concurrently, the buyer may also set a tailored discount rate (TR) that applies to the AP and an extended payment timeline (PE) for the balance due. We analyze the value and interplay of these elements by comparing optimal contractual terms with different AP, PE, and TR potentials. In general, AP applies to more reliable suppliers, and the coverage could be broadened by the inclusion of PE and TR. Specifically, when the advance discount rate is regulated within a certain limit, the buyer should offer TR without PE to the most reliable suppliers, vs. the floor discount rate with PE to those posing higher risk. Although the buyer normally benefits from practicing PE, the supplier benefits from it only when the risk level is relatively high and suffers from it when the risk level is relatively low; these effects persist although they are weakened in the presence of TR. Overall, PE and TR focus on different risk spectrums and are strategic substitutes for each other. The buyer can thereby retain its maximum payoff by properly configuring PE or TR when the other is under strict regulation. These insights offer strategic guidance for buyers to engineer business cash flows with respect to the risk level of their suppliers and the external regulation environment.

Impact of Advance Payments of Tax on Profit on Effectiveness of Investments

Recently Brusov et al. have developed innovative investment models that are very close to investment practice. Investment models with frequent payments of tax on profit and of interest on debt at the ends of periods have been considered. However, in practice, payments of tax on profit as well as of interest on debt could be made in advance. In the current paper, we developed, for the first time, innovative investment models with frequent advance payments of tax on profit and of interest on debt and studied the impact of these types of payments on investment project effectiveness. Numerical calculations carried out for four innovative investment models (without split flows) showed that, in the case of advance frequent payments of income tax and interest on debt, all the results related to the effect of the number of payments of income tax and interest on debt on the investment projects’ effectiveness were opposite to the results in the case of payments at the end of the periods obtained by Brusov et al. in the previous article. Thus, this means that the method of payments of tax on profit and of interest on debt (in advance or at the ends of periods) changes drastically the effect of the number of payments of income tax and interest on debt on the investment effectiveness. The verification developed by us for the new models with frequent advance payments of tax on income helps create a comprehensive system of correct valuation of the investments’ effectiveness for two schemes for payments of income tax (in advance or at the ends of periods). The obtained results help the tax regulator (Finance Ministry) understand the influence of the frequency of payments of tax on income and the credit regulator (Central Bank) understand the influence of the frequency of payments of interest on debt on the investment projects’ effectiveness. This allows them to modify and improve tax legislation and credit policy, respectively.

Association of the Implementation of Child Tax Credit Advance Payments With Food Insufficiency in US Households

A key component of the American Rescue Plan Act of 2021 included an expansion of the Child Tax Credit with advance payments beginning in July 2021, a "child allowance" that was projected to dramatically reduce child poverty. Food insufficiency has increased markedly during the economic crisis spurred by the COVID-19 pandemic, with disparities among marginalized populations, and may be associated with substantial health care and social costs. To assess whether the introduction of advance payments for the Child Tax Credit in mid-July 2021 was associated with changes in food insufficiency in US households with children. This cross-sectional study used data from several phases of the Household Pulse Survey, conducted by the US Census Bureau from January 6 to August 2, 2021. The survey had 585 170 responses, representing a weighted population size of 77 165 153 households. The first advance Child Tax Credit payment, received on July 15, 2021. Household food insufficiency. The weighted sample of 585 170 respondents was mostly female (51.5%) and non-Hispanic White (62.5%), with a plurality aged 25 to 44 years (48.1%), having a 4-year degree or more (34.7%) and a 2019 household income of $75 000 to $149 999 (23.1%). In the weeks after the first advance payment of the Child Tax Credit was made (July 21 to August 2, 2021), 62.4% of households with children reported receiving it compared with 1.1% of households without children present (P < .001). There was a 3.7-percentage point reduction (95% CI, -0.055 to -0.019 percentage points; P < .001) in household food insufficiency for households with children present in the survey wave after the first advance payment of the Child Tax Credit, corresponding to a 25.9% reduction, using an event study specification. Difference-in-differences (-16.4%) and modified Poisson (-20.8%) models also yielded large estimates for reductions in household food insufficiency associated with the first advance payment of the expanded Child Tax Credit. This study suggests that the Child Tax Credit advance payment increased household income and may have acted as a buffer against food insufficiency. However, its expansion and advance payment are only a temporary measure for 2021. Congress must consider whether to extend these changes or make them permanent and improve implementation to reduce barriers to receipt for low-income families.

Intuitionistic Fuzzy Inventory Model with Deterioration Incorporating Advance Payment with Time-Dependent Demand

Intuitionistic Fuzzy Inventory Model with Deterioration Incorporating Advance Payment with Time-Dependent Demand

A proposed ordering strategy for the retailer in a two tier, advanced payment supply chain

ABSTRACT Facing demand uncertainty and supply uncertainty, the retailer needs to make the order decision before the selling period. Therefore, the retailer can pay in advance to reduce supply risk. In order to protect his capital, the retailer will also require his customers to pay for the goods in advance. Customers may receive a corresponding price discount as well. In this paper, a two tier, advance payment supply chain is modeled. Four scenarios are drawn and the optimal ordering strategy for each scenario is discussed. It was discovered that, in order for the retailer to optimize his inventory cost, increasing the unit sales price and shortening the order cycle simultaneously can help reduce the annual average cost. It was also found that, in order to reduce the retailer’s costs, they should negotiate payment terms with his supplier, particularly requesting for lower portions of advance payments.

A Lot-Sizing Model for Non-Instantaneous Deteriorating Products Under Advance Payment and Non-Linear Partial Backlogging

In reality, the buyers sometimes pay all or a percentage of the product price before receiving it, and the wholesaler sometimes allows them to prepay it at equal intervals. The present study develops a new mathematical model for products with non-instantaneous deteriorating rates by considering consecutive advance payments. In the proposed inventory model, the shortage is consisting of lost sales along with backorders simultaneously. Also, the model considers the backlogging as totally dependent on waiting time for the further cycle. In addition, the appropriate conditions to achieve the optimal solutions have been developed, and numerical instances have been provided to verify and evaluate the results and solution method. The useful methods to effectively reduce the annual total cost are provided according to the results of the sensitivity analysis.

Advance payment based vendor–buyer production inventory model with stochastic lead time and continuous review policy

In this paper, a multi-cycle vendor–buyer supply chain production inventory model is conceptualized. Products in the system are considered to be deteriorated at a constant rate. Before replenishment of the order quantity, the buyer paid the purchase price in advance to the vendor in multiple time with an interest. In the lead time of buyer, the market demand is stochastic. Vendor’s production cost of the item depends on the production rate, labor and technology used for the production. During the production period and shipment of quantity, a green-house gas $$(CO_2)$$ is emitted at a constant rate to the environment. Finally, numerical examples and sensitivity analysis are provided to illustrate the presented model and also corresponding discussions and conclusion are presented.

Price and capacity strategies in the express delivery supply chain: advanced payment, penalty or time insurance contracts

In the Business to Consumer (B2C) environment, it is important to alleviate the mismatch between delivery capacity and demand in the express delivery supply chain. To do this, we propose three contracts to improve supply chain performance: the advanced payment contract, penalty contract, and time insurance contract. To assess these contracts, we considered the supply chain of one e-retailer and one express delivery provider. We discussed which contract is better for the supply chain partners when the three contracts can coordinate the supply chain. We found that when its unit cost of delayed orders is lower, the e-retailer will choose the advance payment contract among three contracts. When its unit cost of delayed orders is medium, the e-retailer will opt for the time insurance contract. When its unit cost of delayed orders is high, the e-retailer will not choose the advanced payment contract. In this case, whether the e-retailer chooses the time insurance contract and penalty contract depends on the value of wholesale price.

Joint pricing deteriorating inventory model considering product life cycle and advance payment with a discount facility

The product life cycle of a deteriorating product is an important consideration in inventory management. This paper simultaneously investigates the optimum pricing and inventory decisions considering product life cycles under price-dependent demand and advance payment systems with a discount facility. A time-dependent holding cost is also introduced. The objective is to carefully balance the critical decision variables in order to maximize the total profit. Furthermore, the theoretical analysis validates the concavity of the profit function. A numerical example and sensitivity analysis are provided to show the characteristics of the model. The study shows that an advanced payment period, installment numbers, product’s maximum life cycle, purchasing cost and demand function significantly influence the total profit. This inventory model with a known product lifetime and advance payments can provide management insights to inventory manager in his/her strategic planning.

Economic Order Quantity Model with Weibull Distributed Deterioration under a Mixed Cash and Prepayment Scheme

Two distinct inventory models are investigated for a deteriorating item under the frequency of advertisement and market price-sensitive aggregate demand where the deterioration percentage complies with Weibull distribution. In one model, the stock-out environment is not studied, while another one handles the stock-out situation by moderately backordering based upon the waiting time duration for the products. Advance payment, another realistic feature, is implemented by paying off a fraction of the acquisition cost amid single or many equal segments from the order placing moment to receiving moment whereas the remaining fraction is accomplished at the order delivery instant by the practitioner to the supplier. The utmost aim is computing the inventory policy along with the market price and marketing strategy to reach the highest total profit for both models. The models formulated here extend several inventory studies previously developed in the literature and suggest several important outcomes. This makes two exceedingly nonlinear and mixed-integer optimization problems, which are elucidated by constructing two efficacious algorithms. Two numerical illustrations are accomplished to perceive the working competence of the algorithms and the consequences of the parameters on the practitioner's optimal policy are highlighted in a tabular form executing a sensitivity examination. Based on the performed analyses, finally, some decision-making salient findings are obtained.

Blockchain-Enabled Deep-Tier Supply Chain Finance

Problem Definition: For many supply chains, deep-tier suppliers, due to their small sizes and lack of access to capital, are most vulnerable to disruptions. In this paper, we study the use of advance payment (AP) as a financing instrument in a multitier supply chain to mitigate the supply disruption risk and compare the traditional system (deep-tier financing with limited visibility) with the blockchain-enabled system (financing with perfect visibility). The main goal of this paper is to shed light on how blockchain adoption impacts agents' operational and financial decisions as well profit levels in a multitier supply chain. Academic/Practical Relevance: Traditionally, because of the limited visibility in the deep-tiers, powerful downstream manufacturers' financing schemes offered to their immediate upstream suppliers are not effective in instilling capital into the deep-tiers. Advancements in blockchain technology improve the supply chain visibility and enable the manufacturer to better devise deep-tier financing to improve supply chain resilience. Methodology: We develop a three-tier supply chain model and take a game-theoretic approach to understand a financially constrained supply chain's optimal operational and financial strategies. Results: We find that the improved supply chain visibility (by blockchain adoption) always benefits the manufacturer by enabling her to induce the desired operational risk-mitigation investment from the tier-1 and tier-2 suppliers. However, depending on the directional change in the operational risk-mitigation investment, which depends on the suppliers' initial wealth levels, the tier-1 and tier-2 suppliers can be worse-off. The win-win-win outcome takes place only when all operational risk-mitigation measures increase, that is, when the tier-1 supplier is severely capital constrained but the tier-2 supplier is moderately capital constrained. Comparing the two types of blockchain-enabled deep-tier financing schemes, adjacent-tier delegated financing versus cross-tier direct financing, the manufacturer strictly prefers the latter. In contrast, the tier-1 supplier strictly prefers the former because the former endows the tier-1 with financial leverage over the manufacturer. The tier-2 supplier prefers the latter only when the emergency source is expensive. Managerial Implications: Our insights help firms assess opportunities and challenges associated with enhancing supply chain visibility via blockchain adoption.

A Study on the Utilization of Trade Insurance for Expansion of Advance Payment Terms of Small and Medium Exporters

A Study on the Utilization of Trade Insurance for Expansion of Advance Payment Terms of Small and Medium Exporters

Application of the Modigliani–Miller Theory, Modified for the Case of Advance Payments of Tax on Profit, in Rating Methodologies

Application of the Modigliani–Miller Theory, Modified for the Case of Advance Payments of Tax on Profit, in Rating Methodologies

좀비기업(zombie enterprises)의 파산비용선지급제도 개선 방안에 관한 연구

중국의 발전은 여전히 주요한 전략적인 기회가 있음으로 인하여 경제 구조의 최적화를 가속화할 필요가 있다. 정상적인 사회주의시장경제의 경쟁질서를 보장하기 위해서는 부실성(亏损性), 흡혈성(吸血性), 납치성(绑架性) 등 특징을 지닌 “좀비기업(zombie enterprises)”에 대한 청산이 불가피하다. 관련 법률의 규정에 따르면, 파산 청산은 “좀비기업”을 처리하는 주요 방식이다. 하지만 “파산비용 이해관계자 선지급제도” 등 법적 제도는 어느 정도 한계가 있으며, “좀비기업”의 파산비용이 효과적인 보장을 받을 수 없고, 대량의 “좀비기업”이 시장에서 제대로 퇴출되지 못함으로써 시장 자원이 효율적이고 합리적으로 배치되지 못해 경제구조의 최적화를 방해하였다. 파산비용사회전문기금을 설립하여 “좀비기업”의 파산비용에 지출되는 것은 이상의 문제를 해결하는데 현실적인 요구인 것이다. 이에 따라 이러한 문제해결에는 한편으로 파산비용의 예산절차와 결산절차를 엄격하게 규정해야 하며, 다른 한편으로 파산 관리인이 근면하고 성실하게 책임을 다할 의무를 엄격히 규정할 필요도 있다. 따라서 우리는 사회적 공공이익을 위해 파산절차를 계속 가동하거나 운영하여 파산사례의 이해관계자들의 합법적 권익을 충분히 보장하고, 사회적 공평과 정상적인 시장경쟁 질서를 유지해야 한다.

Analysis of a Two-Storage System for Advance Payment Policies with the Partial Backlogged Shortage

Nowadays, due to the highly competitive situation, every business organization faces many shortcomings for smoothly running of his/her own business. So, to survive in the competition, different types of business policies are required (all-unit discount, trade credit etc.). This type problem is presented mathematically as an optimization problem and solved. In this work, the advance payment facility with n equal instalment before receiving the products is introduced to formulate a two-storage inventory model. This model is studied under the assumptions of price and advertisement’s frequency-dependent customers’ demand, constant deterioration and exponential backlogging rate. Deterioration is started in both warehouse at the same time. To solve the proposed model, MATHEMATICS and MATLAB software are used. The concavity of the objective function (average profit) is shown numerically as well as graphically by using MATHEMATICA and MATLAB software for supporting a numerical example. Also, it is shown that the objective function is negative definite by using an example. Finally, sensitivity analyses is carried out pictorially with the changes of various known parameters.

Financial and Operating Working Capital: Unraveling Obscured Portion of Balance Sheet

ABSTRACT&#x0D; Purpose- The purpose of this study is to provide a new obscured aspect of financial working capital in working capital management, and investigate the association between financial and operating working capital with business performance. This paper also examines the interacting effect of net cash flow on this relationship. The current study introduces a modification in cash conversion cycle (CCC) by taking concealed trade advance payments.&#x0D; Design/methodology/approach- This study employs fixed effect regression model, covering a sample of Automobile sector companies, listed at Pakistan Stock Exchange (PSX) for the period of fourteen years from 2005 to 2018. Secondary data is collected from companies’ financial annual reports, PSX website, and Balance sheet analysis of State Bank of Pakistan (SBP). The study is explanatory and deductive in nature. Financial working capital (FWC) and new measure of operating working capital (OWC) i.e. modified cash conversion cycle (mCCC) is introduced &amp; empirically tested with 252 firm-year observations.&#x0D; Findings- The regression results shows, a convex association between OWC &amp; FWC, with business performance, in dearth of internal cash. However, after taking interacting effect of internal availability of cash, only FWC relation has become concave. The result also shows that mCCC provides a more realistic view of OWC.&#x0D; Research limitations/implications- This study has considered, concealed trade prepayments only, further research could include other components in mCCC. Moreover micro, macro factors and status of the economy such as depression or boom may also affect the results of the research. The findings suggest that managers should separately deal operating &amp; financial working capital. Firms’ performance can be enhanced, if Finance Manager Take account internal cash of the firm. In case of deficiency (sufficiency) of it, he should work to decrease (increase) the investment amount in operating working capital (financial working capital). Overall, the results will be helpful to the financial experts and business practitioner in analyzing, and utilization of their resources.&#x0D; Originality/value- This study adds a new dimension in working capital by separating it into operating and financial working capital. The study also offers insights into the new knowledge of extension in CCC, role of concealed advance payments and internal cash flow, for class teachers and business practitioners. It will also describe the new avenues for further research in this field. &#x0D; &#x0D; Key Words: Financial working capital, Operating working capital, Trade advanced payments and modified cash conversion cycle (mCCC).

A sustainable inventory system with the advanced payment policy and trade-credit strategy for a two-warehouse inventory system

Purpose This paper aims to consider a sustainable inventory model with price dependent demand, non-instantaneous deterioration rate, discount facility, partially backlogged shortages and advance and delay in payments for a two-warehouse system. Design/methodology/approach This model considered a non-instantaneous deterioration, which starts after a certain period with a constant rate. The deterioration rate in the rented warehouse is more compared to own warehouse. The proposed model focused on two things. The first one is to the benefits of the advance payments strategy and delayed payment for the retailer and supplier, where the two-warehouse system is available and the second one is using an appropriate discount facility on no of the installment to maximize the total profit. The classical optimization technique is used to solve the problem. Findings The combination of trade-credits and advance payments is initiated to provide more benefits to the retailer. The findings prove that advance payments, which are received from the retailer to the supplier are beneficial for the supplier, who can influence the demand increase because of higher lower selling prices. Decreasing the selling price is used as a catalyst to increase demand. It also extends the discount concept of Khan et al. (2019, 2019b). Research limitations/implications This model is limited by the fact that it does not consider variable deterioration. Therefore, the proposed inventory model could be extended by considering variable deterioration, as well as fully backlogged shortages and time-dependent demand function. Originality/value The study simultaneously considers a non-instantaneous deterioration inventory model, advance-payment, trade-credit for a sustainable two-warehouse inventory system. From the literature search to the best of knowledge no researcher has undergone this sort of study.