CASH SALES VS.

INSTALLMENT SALES:

AN ANALYSIS OF CONSUMER PAYMENT METHODS IN MOTORSTAR

A Case Study

Presented To The Faculty

Of College of Business Administration and Accountancy

Rizal College of Taal

In Partial Fulfillment

Of the Requirements for the Degree of

BACHELOR OF SCIENCE IN ACCOUNTANCY

Salazar, Danica Jane A.

Tumbaga, Leonard V.

Urbana, Juvel O.

2020

1
 Rizal College of Taal

College of Business Administration and Accountancy

APPROVAL SHEET

In partial fulfilment of the requirements for the Degree of Bachelor of Science in

Accountancy, this case study entitled Cash sales VS Installment sales: An Analysis of

Consumer Payment Methods in Motorstar – Lemery Branch, submitted by Juvel O.

Urbana, Danica Jane A. Salazar and Leonard V. Tumbaga has been examined and

hereby recommended for Oral Examination.

Mr. Michael Joe C. Buceta

Adviser

PANEL OF EXAMINERS

Approved by the committee of Oral Examiners with a grade of _____________________

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 ACKNOWLEDGEMENT

First of all, we would like to express our deepest gratitude to our adviser,

Mr.Michael Joe C. Buceta for sharing his knowledge to finish this study at its designated

time and for giving us the opportunity to make this study a part of our endless search for

knowledge.

Great thanks to our loving parents for all the love and support in doing this study.

They made us successful by helping us in a big way by providing us financial support

and especially the inspiration and strength in the accomplishment of everything we do.

We also give our sincerest thanks and appreciation to for

being kind in accommodating and entertaining all the queries made by the proponents.

We would also want to thank everyone who contributed their help to make this

study possible particularly our friends and classmates.

Above all, Almighty God for all blessings, wisdom, inspiration, courage and

enlightenment bestowed upon the researchers during this study.

The Researchers

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 DEDICATION

We wholeheartedly dedicate this study to the following :

To our parents, who provided us the continuous moral and financial support.

To our brothers, sisters, friends and classmates, for their pieces of advice.

To our beloved professor, Mr. Michael Joe C.Buceta who by all means gave his

support and advice to us from the start to end.

And above all to the Almighty God, who gave us knowledge and ideas to work on

this case study.

Danica Jane A. Salazar

Leonard V. Tumbaga

Juvel O. Urbana

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 Table of Contents

Tittle Page ………………………………………………………………………………….

Approval Sheet…………………………………………………………………………….

Acknowledgement ………………………………………………………………………..

Dedication………………………………………………………………………………….

Table of Contents…………………………………………………………………………

Case Abstract……………………………………………………………………………..

Chapter I

Introduction……………………………………………………………………………….. 7

Background of Study……………………………………………………………………. 13

Chapter II

Statement of the Problem………………………………………………………………… 17

Chapter III

SWOT Analysis …………………………………………………………………………….. 18

Chapter IV

Presentation of Courses of Action …………………………………………………….. 21

Alternative Course of Action ……………………………………………………………. 27

Conclusion…………………………………………………………………………………. 30

Recommendation…………………………………………………………………………. 31

Detailed Plan of Action …………………………………………………………………. 33

APPENDIX

BIBLIOGRAPHY

Curriculum Vitae

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 CASE ABSTRACT

Type of document : Case Study

Tittle: Cash Sales vs. Installment Sales-

An Analysis of Consumer

Payment Methods in Motorstar

Lemery Branch

Researchers: Urbana, Juvel O.

Tumbaga, Leonard V.

Salazar, Danica Jane A.

Course : Bachelor of Science in Accountancy

Rizal College of Taal

Number of Pages : 33

Date Completed: April 13, 2020

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 CHAPTER 1

Introduction

Satisfying customer needs is the most important thing a management can do for

its clients. Having strong perceptions about own ideas for innovations may help the

management grow bigger as it goes along with the business, which can be a factor to

achieve loyalty from consumers. But not all people can afford something from a large

company considering the price of the product versus the daily needs versus their

monthly/weekly salary. That is why in present times, discount promos and flexible

payment terms are offered by most companies nowadays. Different payment options

are made available to increase profitability on the sellers’ part and payment flexibility for

customers. The motorcycle industry is one of those who apply cash basis and

instalment payment methods to increase their sales.

Motorcycle dealership is one of the raising industries in Batangas. Most business

transactions in this industry is done through cash and installment methods or credit.

Firm face a modest competition they use credit as an important tool in sales. Granting

credit sales enable the firms’ revenue to upsurge and in a long run pushes up the

profitability. While providing credit as a main source of generating income in most firms,

they take into account of credit management which helps them to minimize the risk, to

avoid in financial distress and bankruptcy. Accepting the fact that in business world, not

all transactions are done through cash basis instead most of the transactions are made

through instalment. An instalment sale is an arrangement in which the seller allows the

buyer to make payments over an extended period of time. In an installment sale, the

buyer receives the goods at the beginning of the instalment period and makes

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payments over the instalment period. In other words, revenue and expenses are

recognized at the time of cash collection and not at the time of sale.

Cash Basis

Accounting records prepared using cash basis recognize income and expenses

accounting to real-time cash flow. Income is recorded upon receipt of funds, rather than

based upon when it is actually earned; expenses are recorded as they are paid, rather

than as they are actually incurred. Under this accounting method, therefore it is possible

to defer taxable income by delaying billing so that payment is not received in the current

year. Likewise, it is possible to accelerate expenses by paying them as soon as the bills

are received in advance of the due date.

Accrual Basis

A company using an accrual basis for accounting recognizes both income and

expenses as the time they earned or incurred , regardless of when cash associated with

those transactions changes hands. Under this system, revenue is recorded when it is

earned rather than when payment is received , expenses are recorded when they are

incurred rather than when payment is made.

Cash Basis vs. Accrual Basis

As we’ve seen the key difference between the two methods of accounting has to

do with how each method records cash coming into and going out of the company. At

any one point in time, a company’s accounts will look very different depending on which

8
accounting method was used to prepare those accounts over time, these differences

diminish since all expenses and revenues are eventually recorded. In contrast the

accrual method is designed to recognize income and expenses in the period to which

they apply , regardless of whether or not money has changed hands.

Installment Sales Method of Revenue Recognition

Installment method is a method of revenue recognition in which gross profit is

deferred until cash from the sale is received. Unlike the cost recovery method, which

defers the profit till the cash collections exceeds the costs; installment method

recognizes proportionate profit at receipt of each installment. It is only applied in

situations, for example in real estate, when the risks and rewards are not completely

transferred at the time of sale. It differs from cost recovery method because in

installment method there is less doubt about collectability of the installments. Installment

credit, as a kind of credit does not differ from any other form of credit. However,

installment credit isalso consumer credit for it is a means of financing the transference

of commodities to the person who uses them directly in the satisfaction of his wants.

Seligraan (2015) lists that the essential characteristics of installment credit as a form of

consumer credit is its comparative durability of commodities sold on the installment

plan. Another essential characteristic of installment credit, so far as the element of

durability is concerned, consists in payment for the goods before utilization as

compared with payment after utilization. Thus the amount due, in view of the down

payment and the terms of payment, is always arranged so that it will be less than the

-value of the commodity. By the nature of the arrangement of payment as fitted to the

9
durability of the commodity. The utility or value does not vanish when the loan is

liquidated. While the terms of payment may extend over a period of one to three years

in the ease of automobiles and furniture, the commodities themselves are likely to last

from seven to 20 years. On the other hand, another characteristic of goods sold by way

of installment credit is its relatively high price.

Process of Motorcycle Repossession: Reducing Credit Risks

The process of repossession begins when the client, who borrowed money from

a lending body, to buy a motorcycle suddenly stops or fails making payments on his

behalf. Technically, the lending body, either a bank or partner lending institution of the

motorcycle shop, has the right to repossess the vehicle after one missed payment. But

repossession is a tedious process, usually waiting a few months of missed payments

before actions are finally taken. Process may vary from one institution or establishment

to another.

After a few missed payments, the lending body will try to contact the client via

available modes of communication- e-mail, valid contact numbers, or authorized

collector, to warn them about repossession. Banks and towing companies are now

allowed to enter personal property for the sole purpose of repossessing and towing

vehicles even without anyone’s permission, as long as all available means of

communicating has been done.

Repossessed vehicles are sold to attempt to recover any money that has been

lost on it. Usually, repossessed vehicles are sold in more affordable prices and even

10
less than its worth during auctions. If the motorcycle auctions off or less than the

balance owed, the borrower is still held liable for the difference. This is called the

deficiency balance. If the borrower fails to pay the deficiency balance,the bank has the

right to sue the individual. In most cases, if small amounts of deficiency balance is left,

the lending body no longer files law suits although they have the right to do so.

Impacts of Repossession to Clients

Repossession post an impact to an individual whose vehicle has been

repossessed. First, it is pretty degrading to feel that something has to be taken away

from you simply because you cannot afford to pay for it anymore. Knowing that you

bought that vehicle to enjoy and use it. This creates an emotional impact to an

individual. But aside from that, this can also affect one’s good credit standing. One’s

credit score will decrease dramatically if he fails to negotiate with them. A motorcycle

repossession stays on credit report for seven years. This shows claimed delinquent loan

records of clients who failed to make payments. This will possibly prohibit the individual

from getting future loans. If in case, the clients still owe money from the lender even

after the repossession, the lender still has the right to come after you for unpaid

balances, even after seven years.

Voluntary Repossession

Voluntary repossession is a more civil way of negotiating with the lender if the

borrower believes that he can no longer pay his balance. Though this will still reflect to

one one’s credit standing, it will have less impact since the borrower voluntarily

11
surrendered the vehicle for repossession. Also, the lender is also likely to be a willing to

work on your future loan requests and purchase. However, the same process is applied

in terms of payable deficiency balances though the individual opt to voluntarily

surrender the vehicle.

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 Background of Study

Eastworld Motor Industries Corporation (EMIC) is the exclusive Assembler and

Distributor of Filipino brand MOTORSTAR Motorcycles and Scooters with its head office

located at 304 3rd St.corner 10th Avenue Caloocan City. EMIC was established in

February 2002 and dramatically made an Impact in the market during its first few years

of existence. It has evidently surpassed the sales of the other motorcycle suppliers

through its nationwide dealership during the recent surveys. EMIC is also registered

member of the Motor Vehicle Development Program (MVDP) of the Board of Investment

(BOI). EMIC was a former member of MDPPA (Motorcycle Development Program

Participants Association) from 2006 – 2011, and currently a member of CHAMMP

( Chamber od Assemblers and Manufacturers of Motorcycles Philippines) where only

the motorcycle supplier wit good standing in terms of quality of units, excellent after –

sales services and BOI compliant are being accredited . EMIC is armed with dedication

to help improve Filipino life by providing quality nationwide, thus, on the process

creating more jobs to help contribute in nation building.

Probikes Motorcycle Center is a Filipino owned company engaged in retail

operation exclusively for Motorstar brand of motorcycles and scooters nationwide. It has

been registered with the Department of Trade and Industry last April 2004. For the last

ten (10) years of operations, PMC has established 204 branches nationwide providing

local jobs as part of the company’s corporate social responsibility. It has strengthened

our commitment to after sales back in terms of providing affordable, accessible

spareparts and services to sustain our products stability. With the present active growth

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of the industry, PMC is even more commited to expansion programs in the countryside

in consonance with the government’s drive to development and nation building.

Mission

We want to get people on bikes and keep them there. We strive to foster

bicycling in Denver as a viable means of transportation, and as a means to address

wealth and health disparities that exist in our communities. We seek to empower

individuals to take control of their transportation, health, and sense of community.

Vision

We want to see multiple Bikes Together centers throughout the city of Denver.

Each center will have its own unique focus but primarily will serve as an active hub for

bicycle education, access to bike maintenance, and access to bicycles through our

free/earned bike programs and retail sales. We seek to engage each community we are

active in, to sustain the location, and help fulfill our mission.

Our Values

 Safety

 Personal health

 Environmental health

 Creating community

 Sustainability

 Diversity

 Equality

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 Education

 Self-sufficiency

 Fun

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 Objective of the Study

This study entitled ‘Cash Sales vs installment Sales: An Analysis of Consumer

Payment Methods in Probikes Motorcycle Center-Motorstar- Lemery Branch ’ aims to

analyze the profitability of the consumer payment options offered by Motorcycle

Dealership company-Probikes Motorstar located at Lemery, Batangas.

Two payment options are available in Probikes Motor Center-Motorstar, Lemery

Branch- namely cash basis and installment basis. Specifically this study sought to

identify the payment and collection methods offered to Probikes Motorcycle Center-

Motorstar customers and how it affects the company’s profitability, extent of possible

losses due to payment-related problems, and the conceptualization of a comprehensive

collection and recognition method for more reliable valuation of the company.

16
 Chapter II

STATEMENT OF THE PROBLEM

This case study entitled “Cash Sales vs installment Sales: An Analysis of Consumer

Payment Methods in Probikes Motorcycle Center-Motorstar- Lemery Branch” inspected and

analyzed the payment/ collection methods utilized by Probikes Motor Center-Motorstar

among its customers. Specifically, it sought to answer the following inquiries:

1. What payment/collection methods are available for Probikes Motorcycle Center-

Motorstar customers?

2. How does the implemented collection and recognition policies affect the profitability of

Probikes Motorcycles Center-Motorstar?

3. What collection and recognition method can be proposed for more reliable valuation

of Probikes Motorcycles Center-Motorstar?

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 CHAPTER III

SWOT Analysis

A. Strength
 Accommodating Sales Personnel

All personnel are imbibed with the value of Integrity, Professionalism,

Teamwork, Loyalty , Work Excellence, respect for People, culture of Innovation

and Strong belief in Customer Care

 Attractive appearance

The physical appearance of the branch enable the entity to attract several

customers since the way it appears to the eye of its customers may contribute to

positive buying behaviors of clienteles.

 Location

Probikes Motorcycle Center-Motorstar Lemery, Batangas Branch is

perfectly located within Lemery-Taal BAtangas boundary, near Lemery

Public Market and commercial centers, with no immediate competitors

within the area, which contributes positively to the entity. This enables the

entity to reach more prospect buyers from two close municipalities of

Batangas.

 Reliable Price

The prices of all units of motorcycle available at the branch are based on

the suggested retail price.

 Additional Service

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 The Probikes Motorcycle Center provides additional services for

customers’ motorcycle needs. They sell affordable motorcycle parts and

accessories and offer services for the installation and repair of such with

the help of their skilled automotive technicians.

Weaknesses

 Lacking manpower

A lack of adequate manpower prevent businesses from completing tasks.

The lack of productivity translates into a reduction in revenue and profit.

 Lack of Consistent Marketing Strategy

Appropriate marketing strategy contribute much to a company’s

profitability. Evidently, there is a lack of consistent marketing promotions

through pamphlets, flyers, advertisements, product promotions, freebies at

the entity.

 Competition in Motorcyle dealership Market

Competitors can produce or offer similar products quickly. Noticeably, the

Motorcycle Dealers within Lemery, Batangas is creating greater

competition among its fellow since they offer similar products and vehicle

brands to customers.

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Opportunities

 Additional Proprietory Product

In the form of patented goods or services, the entity strives to add

innovative products that will not just increase company profit but more

importantly, meet the needs and wants of its customers. Probikes Motorcycle

Center-Motorstar Lemery Branch continues to expand their business and

diversify their product and services portfolio.

 Affiliate relationship and Branding Strategies

Motorstar notes the advantage of being able to build on with clients and

business partners is likely to create a positive impact on the brand.

Threats

 Major competitors sell the same products

Motorcycle dealers selling same models of vehicle is one of the threats in

this industry. Creating chances to sell a product based on its affordability

and payment term flexibility which varies from one entity to another.

 Not competitive price against competitor / dealer

The set of pice of a product is not based on what the competition is

charging. Competitive pricing is used more often by businesses selling

similar products, since services can vary from business to business while

the attributes of a product remain similar. However, some models

available at the entity have higher price than other motorcycle dealers.

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 Chapter IV
PRESENTATION OF COURSES OF ACTION

This chapter presents the data gathered by the researchers with its

corresponding courses of action.

1. Payment Methods available for Probikes Motorcycle Center-Motorstar

customers

Two payment options were made available for Probikes Motorcycle Center-

Motorstar customer namely cash basis and installment basis. The cash basis is a

method of recording accounting transactions for revenue and expenses only when

the corresponding cash is received or payments are made. On the other hand, an

installment sale is a financing arrangement in which the seller allows the buyer to make

payments over an extended period of time. In an installment sale, the buyer receives

the goods at the beginning of the installment period and makes payments over the

installment period. 

Here are the data gathered on the cash basis and installment method for the past

three (3) consecutive months at Probikes Motorcycle Center- Lemery Branch.

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 21
20.00

17

15.00 14

10.00 CASH
INSTALLMENT

5.00

0 0
0.00
AUGUST SEPTEMBER OCTOBER
FIGURE 1. PAYMENT METHODS AVAILABLE FOR PROBIKES MOTORCYCLE
CENTER-MOTORSTAR LEMERY, BATANGAS BRANCH CUSTOMERS

Figure 1 shows cash and installment sales at Probikes Motorcycle Center-

Motorstar Lemery, Batangas Branch from August-October. Based on the data

gathered by the researchers, a total of 2 cash sales were recorded by the entity on

October. On the other hand, a total of 52 motorcycles were released under

installment payment method, 14 of which on August, 17 on September and 21 on

October

The price of motorcycle ranges from P39,000 – P44,500 depending on its brand

and model. Normally, suggested retail prices are applied on cash basis payments. On

the other hand, different pricing is applied in installment sales, depending on the

payment terms chosen by the customer. A 30% interest is imposed to its price, with

payment terms ranging from 6 months to 36 months.

See the attached schedule of amortization for reference.

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AMORTIZATION SCHEDULE HERE.

MOTORSTAR (PROBIKES)

MODEL SPECIFICATIONS SRP RTL   DOWNPAYMENT MONTHLY AMORTIZATION

6 12 18
CUB REGULAR     COD BP DP REC MSC TDP mos Profit mos Profit mons Profit
                FCTR            
40,50 35,50 1,70 3,77 47,30
ZEST X110-III/IIIM Spk, dsc/drm,w/ 0 0 400 0 0 300 2,000 7,150 44,900 5 0 2,650 49,700
36,00 31,00 1,70 3,40 42,80
ZEST X110-III/IVM spk,Mags,dsr/dr 0 0 400 0 0 300 2,000 6,400 40,400 0 0 2,400 45,200
SAPHIRE 110 R-S- 39,00 34,00 1,70 3,65 45,80
RS spk,Mags,dsr/dr 0 0 400 0 0 300 2,000 6,900 43,400 0 0 2,567 48,200
1,70 3,77 47,30
SAPHIRE 110 R/S spk,Mags,dsr/dr 40500 36000 400 0 0 300 2,000 7,150 44,900 5 0 2,650 49,700
35,50 1,70 3,77 47,30
IDOL110 R/S Mags. Dsc/drum 40500 0 400 0 0 300 2,000 7,150 44,900 5 0 2,650 49,700
37,00 1,70 3,77 47,30
NICESS110-I Mags. Dsc/disc 40500 0 400 0 0 300 2,000 7,150 44,900 5 0 2,650 49,700
35,00 1,70 3,81 47,80
IDOL110 R / S Mags. Dsc/disc 41000 0 400 0 0 300 2,000 7,233 45,400 7 0 2,678 50,200
38,50 1,70 3,81 47,80
WELL125 -R/S spk, dsk/drm 41000 0 400 0 0 300 2,000 7,233 45,400 7 0 2,678 50,200
40,50 1,70 3,94 49,30
WELL125 R M Mags, disc/drum 42500 0 400 0 0 300 2,000 7,483 46,900 2 0 2,761 51,700
1,70 3,98 49,80
FOX 125 R Mags,disc/drm 43000 41000 400 0 0 300 2,000 7,567 47,400 3 0 2,789 52,200
42,50 1,70 4,10 51,30
FOX125 RS Mags,dsc/drm 44500 0 400 0 0 300 2,000 7,817 48,900 8 0 2,872 53,700
42,00 1,70 3,98 49,80
MSX125 -R/RS Mags. Disc/disc 43000 0 400 0 0 300 2,000 7,567 47,400 3 0 2,789 52,200
43,50 1,70 4,06 50,80
SAPPHIRE125/R/S Mags, disc/drum 44000 0 400 0 0 300 2,000 7,733 48,400 7 0 2,844 53,200

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OFF ROAD                            
3,81 47,80
MSX125 -R/RS Spk, dsc/dsc, Msh 41000 38000 400 0 1700 300 2000 7233 45,400 7 0 2,678 50,200
4,81 59,80
TRLAX200 spk,dsc/dsc, Dsh 53000 50000 400 0 1700 300 2000 9233 57,400 7 0 3,344 62,200
1090 5,65 71,50
MOTO X 155 Spk,dsc/dsc,Msh 63000 62500 400 0 2900 800 3700 0 69,100 0 0 3,900 73,900
1173 6,06 76,50
MOTO R 155 Spk,dsc/dsc,Msh 68000 65000 400 0 2900 800 3700 3 74,100 7 0 4,178 78,900
1190 6,15 77,50
MSX200-II Spk,dsc/dsc,Msh 69000 65000 400 0 2900 800 3700 0 75,100 0 0 4,233 79,900
CRUISER                      
4,98 63,50
XPLORER Z 150-I Mags, disc/disc 55000 54000 400 0 2900 800 3700 9567 61,100 3 0 3,456 65,900
1056 5,48 70,20
XPLORER X200R Mags, disc/disc 61000 60000 400 0 3600 800 4400 7 67,800 3 0 3,789 72,600
XPLORER-Z200- 1203 6,21 79,00
I/II/ Mags, disc/drum 69800 67000 400 0 3600 800 4400 3 76,600 7 0 4,278 81,400
1506 7,73 97,40
XPLORER-Z250 Mags, disc/drum 88000 83000 400 0 3600 1000 4600 7 95,000 3 0 5,289 99,800
TRICYCLE                          
3,65 47,00
STAR-X125-I/II/III spk,Drm/Drm 39000 37000 400 0 2900 300 3200 6900 44,600 0 0 2,567 49,400
4,23 54,00
STAR-X155-I/II spk,Drm/Drm 46000 46000 400 0 2900 300 3200 8067 51,600 3 0 2,956 56,400
SCOOTER                          
EASYRIDE150/R/R 4,15 51,80
/ Amags,Dsc/Drm 45000 42000 400 0 1700 300 2000 7900 49,400 0 0 2,900 54,200

Note: DP=TDP-REC-MSC
M.A = (SRP-DP)/TERM+400

24
2. EFFECTS OF COLLECTION POLICIES AND RECOGNITION POLICIES ON
PROBIKES MOTORCYCLE CENTER-MOTORSTAR’S PROFITABILITY

CASH SALES INSTALLMENT SALES

BENEFITS
1. Seller never gets low in cash 1. Seller earns more through

as long as sales are paid in installment sales since greater

cash basis. interest is imposed to these.

2. Cash selling entities have 2. Seller has the right to reposess

lower risks of having or the merchandise in case of

fearing bad debts. buyer’s failure to make updated

3. 100% of cost, and profit is payments.

realized at the point of sale. 3. Deferral of taxes to be paid.

4. Interest can be charged to

buyers.

COST
1. Greater tax is imposed. 1. Cash may not be available

2. Smaller profit is imposed when necessary.

to these merchandise. 2. Risk of losses due to stop-

payments is high.

3. Cash is stucked among

customers and remain

receivables until payment

terms are paid completely.

25
3. Proposed Collection and Recognition Method for more reliable Valuation of
Probikes Motorcycles Central-Motorstar Lemery, Batangas Branch

Typically, Probikes Motorcycles Central-Motorstar Lemery, Batangas Branch

encounters collection difficulties among installment sales clients. Since this payment

methods has high risks of stop-payments, failure to make periodic payments is an

immediate course to take an action.

After a month or two of failing to update payments, Motorstar shall enforce

measures to contact and collect a payment from the customer by contacting him via

phone, e-mail, or physical visit in his residence.

If the customer fails to negotiate even after the measures taken by the entity, after three

consecutive months, the dealer shall enforce compliance by the buyer with damages

and the repossession of the sold motorcycle unit. The repossessed motorcycle unit will

then be resold to recover any amount due to it.

26
 ALTERNATIVE COURSES OF ACTION

1. OFFERING MORE PAYMENT OPTIONS

Entities shall take full advantage of technological advancements relevant

to making bills payment more accessible to customer. Credit Card, Debit

Card, and Wireless Mobile Payment are among possible options that

could help customers make update payments.

ADVANTAGES

 Customers can make payments whenever and wherever they are,

helping them avoid late fees for delayed payments.

 Increase in number of updated payment records among customers.

DISADVANTAGES

 This may add operational expense for the equipment and resources for

credit card, debit card, and wireless mobile payment.

2. DISCOUNT FOR CUSTOMERS WHO PAY IN CASH AND REBATE FOR

UPDATED INSTALLMENT PAYMENTS

ADVANTAGES

 This will attract more customers who acquire a motorcycle unit at

reasonably affordable price.

 Profit is immediately realized at the time of cash sales.

 This will encourage customers to pay their dues on time.

 Increase in the number of accounts with updated payments.

DISADVANTAGES

 Smaller profit will be generated in cash payment method.

27
3. COMPREHENSIVE MARKETING STRATEGY FOR INSTALLMENT SALES

METHOD

ADVANTAGES

 Greater profit is gained in this method.

 This will invite and entice more customers who would like to acquire a

motorcycle unit but has no enough budget to pay for it in cash basis.

 This will increase company’s competitiveness in the market.

 Great way to promote and sell a motorcycle unit.

 Motorcycle unit can be repossessed in this payment method.

DISADVANTAGES

 Risk of bad debt goes up as uncollectible accounts grow in numbers..

 Profit is delayed until the full amount in installment sales is collected as

per its amortization schedule.

 Credit investigation may incur additional cost on the part of the seller

for cases of stop-payments.

 Additional operation expense shall be allotted for salaries of payment

collectors.

4. SUGGESTING MORE FLEXIBLE PAYMENT TERMS

Another alternative could be the combination of cash and installment sales

wherein customers can freely choose a flexible payment term, designed to

meet his budget for the desired motorcycle unit. For example, the

customer may opt to pay 70% of the unit’s price in cash and remaining

30% of the price through installment basis. This will lower the interest

28
 incurred to the price of the unit compared on following fixed down payment

schemes offered in some motorcycle dealership entities. This will also

help the seller generate abrupt income compared to installment payments

which may take a maximum of three years.

ADVANTAGES

 Reduced risk of possible losses due to stop-payments.

 Income is immediately realized.

DISADVANTAGES

 Risk of stop payment.

29
CONCLUSION

Based on the data gathered by the researchers, the following conclusions were

drawn:

1. PAYMENT/COLLECTION METHODS ARE AVAILABLE FOR PROBIKES

MOTORCYCLE CENTER-MOTORSTAR LEMERY, BATANGAS BRANCH

CUSTOMERS

Two payment options are available for Probikes Motorcycle Center-Motorstar

Lemery, Batangas Branch customers namely cash and installment payment

methods.

2. EFFECTS OF THE IMPLEMENTED COLLECTION AND RECOGNITION

POLICIES ON PROFITABILITY OF PROBIKES MOTORCYCLES CENTER-

MOTORSTAR LEMERY, BATANGAS BRANCH

The payment options utilized by the entity poses benefits and costs to its

profitability. The entity earns less in cash payments and greater profit in

installment payments. However, a risk of stop-payment is high in installment

payment method, drawing potential losses if so, while profit is immediately

realized in cash basis.

3. PROPOSED COLLECTION AND RECOGNITION METHOD CAN BE FOR

MORE RELIABLE VALUATION OF PROBIKES MOTORCYCLES CENTER-

MOTORSTAR LEMERY, BATANGAS BRANCH

Alternative courses of action were suggested by the researchers to minimize, if

not to eradicate, potential losses and create increased profitability for the entity.

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RECOMMENDATION

This case study entitled “Cash Sales vs installment Sales: An Analysis of

Consumer Payment Methods in Probikes Motorcycle Center-Motorstar- Lemery Branch”

inspected and analyzed the payment/ collection methods utilized by Probikes Motor

Center-Motorstar among its customers. Upon careful considerations of the data

gathered, the researchers recommend the following.

Additional payment options through cashless payment systems can be a great

innovation in motorcycle dealership industry, and be a way to invite potential buyers

whether in cash or installment basis. This will also be an innovative way of avoiding late

or overdue payments since this will no longer require them to travel from wherever they

are, to the office of the motorcycle dealer just to pay their dues.

A cashless payment system is dependent on specific instructions governing the

transfer of funds from one account to another. Card based systems allow access to

accumulated and/or borrowed funds and take three forms - debit, smart and credit

cards:

Credit Card Payments. From a cardholder’s perspective, a credit card

account represents an established credit line against which payments are

deferred through creation of a loan from the sponsoring financial institution.

Debit Card Payments. – A debit card purchase thereby initiates a

transaction in which the value of the transaction is subtracted from the card

holder’s account balance and transferred to the retailer.

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 Wireless Mobile Payment – transaction processing in which the payer

uses mobile communication techniques in conjunction with mobile devices for

initiation, authorization and confirmation of an exchange of financial value in

return for goods and services.

The researchers also recommend the development of a comprehensive

marketing strategy to invite more potential buyers in installment basis. Since the entity

earns more from this method, more product promotions and advertisements of such

shall be evident and disseminated using various ways. Taking full advantage of the use

of the internet and social media platforms is one efficient way to reach more potential

customers. Aside from that, pamphlets and flyers also don’t go out of style since

although a lot of people have access to the internet, not everyone can be reached

through it. This alternatives will draw benefits for the entity in terms of increasing its

profitability.

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DETAILED ACTION PLAN

In carrying out the recommended alternative course of action, with the aim of

increasing cash and installement sales, the researchers suggest the following detailed

action plan.

1. OFFERING MORE PAYMENT OPTIONS

The entity shall negotiate with credit and debit card providers to make

credit and debit card payments possible for customers who wish to

acquire a motorcycle unit in cash or installment basis. Also, the entity shall

explore wireless mobile payments used by customers such as Gcash,

Paymaya, Paypal, Coins etc. to make payment easily accessible anytime,

anywhere.

2. DISCOUNT FOR CUSTOMERS WHO PAY IN CASH AND REBATE FOR

UPDATED INSTALLMENT PAYMENTS

The entity shall design payment adjustments for cash sales, and rebate for

accounts with updated payments under installment basis.

3. COMPREHENSIVE MARKETING STRATEGY FOR INSTALLMENT SALES

METHOD

Advertisements play a very significant role to the success of any business.

The entity shall get and keep in touched with customers and the market

through the utilization of Social Media Sites such as Facebook, Instagram

and more. Aside from that, pamphlets and flyers shall be disseminated

within and across municipalities to invite more potential customers. The

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 should also consider hiring a marketing consultant for efficient product

promotions.

4. SUGGESTING MORE FLEXIBLE PAYMENT TERMS

The entities’ sales representative should promote more flexible payment

terms which combines cash and installement payments in transactions.

Customer inquiries about this should also be addressed efficiently through

a public relation officer. Also, consider conducting investigation to evaluate

the customer’s credit standing if one opts to pay through instalment basis.

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