Effective Ways to Deal with Credit Pressure from Customers

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3 Proven Ways to Deal with Credit Pressure from Your Customer Today
Regardless of the size of your business, unpaid invoices are an inconvenience. Having unpaid invoices automatically translates into dealing on credit within your business and this can threaten the very existence of your business.

 

 

Whose Today’s Guest?

 Brian Kofi Kunda is a Consistent top management performer with a track record of successive advancement achieved through proactive leadership, with a unique blend of skills and knowledge in the areas of Business, Operations, and Strategic Management.

What it Means to Sell on Credit

 This is the ability for a client to obtain goods or services before the payment on a basis that the payment is going to be made in full in the near future.

Why Sell on Credit

For one to reach this conclusion of selling on credit it means you are looking at the type of customers that you have. You determine that selling to those particular clients would be tricky and you might end up not selling a thing, so you look at when they are likely to get paid. You can then entice them to get the product o credit so that you make the sale knowing that you will receive the money at a later date.

Withstanding Credit Pressure

For most small businesses, the challenge that they have is not having enough capital to invest in stock so that they are able to meet the demand from their customer, so extending credit to them will hit them hard on their capital outlay.

If you’re going to extend credit to your customers, you will have to be very careful and they should be mindful that the product or service being given on credit may not realize the money on time. You should have a solid idea of how to bridge the gap and getting that money back on time so that your stock is replenished.

Practical Ways of Managing Credit Pressure

  • Develop a habit of extending credit to people that you now will pay on time. You need to know or be sure of their financial standing or position. It is easy for someone to pretend to have the capacity to pay when in an actual sense they can’t. if you don’t know who you’re dealing with, ask them to produce certain documents that help you assess their financial standing.
  • Contracts

Come up with credit agreements to which both parties can agree too. Both of you will have to agree to the conditions and commit to the contract. And in the event that one breaches this contract, it is easy for the law to take its course.

These measure my sound time consuming for a small business but business is a going concern and as a business owner you need to make time. If you don’t have the time, then consider engaging consultants to help you with your responsibilities.

Credit Reference Bureau

Getting credit information from a client sounds like a complicated thing to do, but with the introduction of the credit reference bureau that is no longer the case. The credit reference bureau’s mandate is to provide the credit information of any particular individual or institution so long as they have had a bank account.

This information can be accessed by anyone even a small business owner. If you’re dealing with employed customers who have bank accounts or have done business with big institutions it is most likely that their financial information has been captured. They may not have captured everyone but have the information that may lead you to extend or declining to extend credit to someone.

Working with Big Companies

Every small business looks to the big institutions with an aim of conducting business with them. This is because in most cases there always large sums of money involved in such transactions.

Despite this there some challenges that arise from this:

  • Source of Financing

As a small business, you will need to have a great source of financing that will enable you to meet the contract being offered. As a small business ensure that you open a bank account, so that your banking activities are monitored and in such an event (need a source of financing) you can seek to obtain a loan to meet your obligation.

  • Management of operations

In most cases, the big companies take time when it comes to realizing funds, the challenge that a business will face is ensuring that they stay afloat during that period as they wait to receive what’s owed.

Key Insights:

  • Before extending well on credit, look at your capital outlay.
  • Balancing your cash-flow and stock should be what matters the most.
  • You can access your client’s creditworthiness through the credit reference bureau.

“If you decide to become an entrepreneur, you will need to find time to do all you have to in your business to ensure that you stay in operation”

 

Insight Partners Africa— aims to bring you actionable insights from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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