The primary advantage of offering goods on credit to your customers is the significant increase of total sales. In simple terms, individuals and businesses are more likely to make large purchases from your operation if they are not required to pay for the pertinent services or goods immediately. If you do not provide sufficient credit for your customers, you might end up losing them to competitors. On the other hand, indiscriminate credit is a significant problem for any business because it will create cash flow problems. You might also have to engage a debt collection agency to recover the money owed you. Moreover, you will expose your commercial operation to bad debts. Here are some guidelines on minimizing these credit detriments on your business.
Perform Background Checks
If a business wants to purchase goods on credit, you must perform thorough background checks before proceeding. In simple terms, a business is a legal entity, so it accumulates a legal background and a credit history over time. This information will help you evaluate your potential commercial debtor and determine whether they are credit-worthy. You can obtain a business credit report from a specialty commercial reporting agency. You should also search government records and other reports for any unfavourable information related to lawsuits, unfair business practices or fraud reports. The information obtained will also help you set safe and reasonable customer credit limits.
Ensure Payment Clearance
If you have not approved a business for credit, you should be careful not to offer an unintentional debt. Simply speaking, if your customer orders goods, you should not supply before receiving the payment and making certain that it has been cleared. In ideal circumstances, the payment should be in form of a direct deposit. However, if you are paid via a check, you should not ship if the pertinent document is postdated. You should notify your clients of these restrictions to avoid confusion and poor relations. It is also advisable for you to offer an incentive for immediate or early payments for goods and services. For example, you can offer a percentage discount for direct deposits in relation to other payment options.
Prepare Clear Invoices
You should ensure that your business invoices are prepared well and in time to avoid unexpected excuses on late payments. Basically, you should outline the standard details on the required amount for pertinent services or goods. Also, make certain that the details on all your payment methods are included. Additionally, send out invoices as soon as the work is completed.Share