Offering Credit Can Increase Revenues
Companies that want to grow revenues can do so by offering credit to customers.
The credit line is over and above conventional bank financing or the customer’s cash on hand. Offering credit allows customers to purchase goods or services from you when they may not have been able to do so otherwise. The trade-off is that you have elected to delay your cash flow based on your clients’ promise of payment at a later date.
Offering Credit to Customers Can Have the Reverse Effect
Agreeing to give a new or existing customer time to pay should not be taken lightly. Business owners want to generate sales, but also want to help their clients. Sometimes however, the emotional desire to help by offering credit to customers overrides good judgment, creating an avoidable problem.
Credit management decisions must be made using as much objective data as possible. Before offering credit to customers, professional credit managers often refer to the 4 C’s of credit:
- Credit-Worthiness – Your credit-worthiness is based on how you’ve handled credit and debt obligations up to this point.
- Character – Assessed from your work experience, credit history, credentials, references, reputation, and interaction with lenders.
- Conditions/ Collateral – Based on the current state of the economy, on your business, and if you have assets that can be used to guarantee or secure a loan.
- Cash flow/ Capacity – Your ability to repay the loan based on available cash flow.
Offering Credit Based on Emotion vs. Credit-Based Decisions
Beware if your business is a sales-oriented organization headed up by the founder or an executive team that comes from a sales background. Your sales team and your credit manager may conflict with each other. The credit manager’s job is to make credit decisions that find a way to make the sale yet protect your business from risky customers and sometimes from itself. To help the job easier, PCM Corp also offers one-on-one credit manager training.
Businesses with a staff of one up to global multinational organizations can all benefit from making sound credit decisions.
Small Business Owners
This group may feel they can’t afford the professional advice and the tools required. PCM Corp does offer options to allow a small or medium-sized business to gain access to the tools and expertise needed without requiring another employee on your payroll.
Large Firms and Corporations
Large businesses may have an army of credit analysts but require staffing flexibility or more objectivity when deciding whether offering credit to customers is viable or not. Large corporations can take advantage of their more sophisticated ERP systems and outsource the credit decision function.
An Objective View on Making Credit Decisions
At Priority Credit Management Corp (PCM Corp), we provide outsourced commercial credit management decisions for clients who do not want to employ their own credit professional. Both small businesses and large corporations (with a full complement of credit staff) can benefit from these services. Visit our Pro Subscription Plans page for more detailed information on available packages.
When offering credit to customers, our clients appreciate the objectivity we bring, free of influence from internal sales staff. Our credit services provide clients with the flexibility to keep costs in line with sales.
About PCM Corp
Whether you need help collecting debt or making credit decisions like offering credit to customers, we can help you manage your receivables and improve cash flow.