AMC

AMC stands for Annual Maintenance Contract. These are contracts for one year period

towards service and maintenance of the equipment/s. The contract amounts are usually

collected in advance.

It is to be noted that the equipment covered by the contract may fail anytime during

the one year period and the service provider must have adequate money to buy the

parts required.

What I used to do in my line of business was to convert such income into finished

goods. The money in the bank is not going to accumulate any interest. So why not

have it in the form of finished goods. This will also facilitate getting cash discounts

from the supplier.

Occasionally I used to offer air-conditioners on three to five months interest free

instalments to known customers. This way the sale would also increase and the same

time there will be regular cash inflows to the company.