a) Contract default risk - the seller not only loses goods and cash from sales, but has to incur collection expenses as well.
b) Opportunity cost – your restricted cash on credit shall not be invested or utilized for other business activities.
c) Guarantee or mortgage risk – you have to incur cost to verify the value of the guarantee or the collateral from the buyer and take risk of their validity.
d) Cost to maintain a credit management function;
e) Cost relating to training provided to credit management department;
f) Time cost – purchasing power of same amount shall decrease;