How to take advantage of extending customers credit

Wondering how you can take advantage of extending credit to customers?Here are guidelines that can help you maximize your profits and expand your customer base by offering and extending credit to new customers and to current customers.

Guidelines and benefits to extending credit to customers

1.Benefits to extending credit to customers

Why would extending credit to customers be an advantage to you as a business owner?Extending credit to customers is a fantastic way of expanding your customer demographic and to attract new customers to your company.There is a large number of potential customers within your community and within a larger geographical radius who want to be able to purchase your products and/or your services.However, many of these customers have not purchased your products because they don't have the amount of money needed at one particular time.

You can bring in new customers by offering them credit.Usually, this extension of credit consists of "buy now and pay later" advertisements.This means that you will allow customers to purchase your products and/or services now, but you will not require any or all of the payment until a later, and specified, date.While this method of extending credit is common with businesses such as car dealerships and furniture stores, it can be a good marketing option for any business owner who is willing to be disciplined enough to find customers who are not too much of a risk and who will be able to follow through on billing accounts that are due and payments that might be overdue.

2.What to do before you extend credit to a customer

It is pretty unavoidable that you will end up giving a bad loan or extending bad credit to a customer.However, you can take steps to try to avoid this situation by carefully assessing the potential risk and the potential benefits to each customer.You need to decide how much of a risk you will be willing to take on a customer.It has become commonplace for businesses of all types to request formal credit reports from potential customers.You can use this credit report to determine the possibility of whether or not this customer is likely to repay the debt and if the payments will be made on time.

If you are not comfortable requesting a formal credit report, then you should at least collect as much pertinent information from the customer as possible.Get the customer's name, phone number, address, place of employment, place of banking, and a name of a relative that can be contacted in case you need to find the current address of a customer who is not making payment.

3.How to ensure that extending credit is a lucrative move for your business

Along with having a system in place to determine and assess the risk of a customer, you need to have a strict and disciplined system in place to make sure that you can follow through on invoices and billing due dates.You should have a streamlined system that can keep track of when customers' payments are due.You should also have a system in place for following through on customers who are late with their payments.This means that you should set up an accounts receivable department.If your business is not large enough for this department, then you should at least designate a secretary or someone in your accounting department who will be in charge of tracking accounts and following through with accounts that are past due.

Extending credit to customers can help you attract more customers to your business.It is a great way to attract customers who normally would not be able to afford your products.However, it can only be a benefit to you if you are able to adequately assess the risks of individual creditors and to follow through on collecting payments that are due.