The Practical Side of Extending Credit: ” The Practical Side of Extending Credit”
“Some businesses give customers 30 or 60 days to pay for goods and services. They may even let customers make installment payments over a longer period. For example, a small wholesaler of children’s music products might require retail customers to pay at the time of sale, but extend 30 days? credit to wholesale customers. Similarly, many professionals and other service providers extend short-term credit to clients and customers, who are expected to pay after receiving a monthly invoice.
If you extend credit, you need to set up a well-organized, accurate, easy-to-use system of accounts, send out bills periodically and keep after those who pay slowly or not at all – all of which takes time, money and effort. Many small business people fantasize about avoiding the whole mess by requiring customers to pay cash. Unfortunately, this sort of day-dreaming is normally just that; in many businesses and professional practices it’s almost impossible to operate if you don’t extend credit.”
– The hardest part of extending credit is collecting payments when they are due. I have found in extreme cases that a personal touch works best. Go directly to the office or place of business of the deliquent party and request payment or a plan for payment. You will be suprised at how often this works. In the end you can always sell your bad debt to debt collection agencies but you will only receive pennies on the dollar and this should be your last choice. -ed.