Why might a seller claim interest when a buyer delays payment?

In a commercial transaction, a seller may claim interest when a buyer delays payment because interest serves as the price paid for the use of money or credit.1

When a seller extends trade credit—deferring payment for goods or services—they are essentially providing the buyer with a means of financing. Because the seller is sacrificing the immediate use of those funds, they require an inducement to accept a future payment rather than current cash.21

Economic theories, such as the time-preference theory, explain that interest compensates the seller for the time-consuming nature of waiting for payment. Furthermore, the liquidity-preference theory suggests that interest acts as an inducement for the seller to sacrifice their own liquidity by holding a nonliquid contractual obligation instead of immediate capital. When a buyer exceeds the agreed-upon payment terms, the seller claims interest to account for the ongoing cost of the funds being used by the buyer.12