6 Major Disadvantages of Supply Bills

There are some certain disadvantages of supply bills which are described below in detail:

Table of Contents

Disadvantages of supply bills

1. Delay Payment

The collection of supply bills takes time and their mains the possibility of any undue delay in getting payment from the government department due to procedural matters.

2. No exchange facility

Supply bills are not bills of exchange. They do not, therefore, enjoy the legal status of negotiable instruments; being not unconditional in character and neither the amount nor the date of payment is certain.

The security available to the bank in the case of advance against supply bills is by way of assignment of debts represented by the supply bills.

Here the drawback is that despite the assignment of the debt of the bank, the department still has a right to set off against the supply bill amount for any amount due to it.

3. Pay the amount to the assignee only

The debtor, usually the Government, in this case, could pay the amount directly to the creditor unless the assignment is registered with the debtor and the debtor undertakes to pay the amount to the assignee only.

4. No other security

Since the goods are already supplied, the bank has no other security other than the supply bill furnished by the contractor.

5. The amount could be reduced

The amount claimed by the supplier/contractor may be reduced by the drawee for short supply or defective supply or defective work.

6. Payment could be refused

The payment may be refused if there is any defect or default on the part of the drawer in observing the terms and conditions of the contract.

In case the sanctioning authority refuses, for any reason, to make payment of the bill the bank will have no security except the personal security of the borrower.

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