Are you planning to offer credit to customers? Offering credits encourages your customers to speed up their spending amount. In other words, they may also increase the amount they generally spend. Additionally, balancing the potential for increased sales with the risk of reduced cash flow is an integral part of managing risk in your business.
Offering credits allow you to meet or overshoot the marketing sales of your competitors. You may start to see an increase in sales when you start providing credits. When you offer credit to customers, you reward them. In other words, you are entrusting them to buy more from you in the future.
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Using Accelerated Insight Platform to Provide Credits to Customers
These technologies allow incredibly fast processing of data. Therefore, this data can get applied to a variety of applications. Additionally, they give a range of useful insights related to customers’ behavior.
Therefore combining and analyzing data from multiple sources into a centralized cloud-based accelerated insight platform or service allows you to use the numbers to tell a story. In other words, they project a picture that aids in data-led decision-making.
What is Retail Consumer Financing?
A retail credit facility or retail consumer financing is a financing method that provides capital for various purposes.
In other words, retail credit facilities are portfolios structured with different types of debt. They can get used by a company for business needs or customer lending. Let’s see some of the basics of financing.
It is a type of loan made in a business or corporate finance context. Therefore, it allows the borrower to take out money over an extended period rather than constantly reapplying for funds.
The credit facilities are utilized broadly across the financial market as a way to provide funding for different purposes. However, they are often obtained in conjunction with the final round of a corporation’s overall equity financing program. Additionally, retail consumer financing includes the credit facility as well as an equity investment.
Things to make sure of before offering credit to customers
- Firstly, You have to do a credit check- Ask for bank statements before extending the customers’ credit. You can also ask for information from other vendors who already offer credit to customers. Do a background check on the customer. After that, if you are comfortable with what you see, offer them credit.
- Secondly, make sure to have the operating capital to fulfill what you want to extend in Credit- Ask yourself the following questions if you have a product-based business and enough capital?
On the other hand, if your business is service-based, do you have the required capital to carry out a given project while you wait for the payment? If the answer is no, then you have to let go of the customer as well as grind your operations to a halt.
However, this does not mean you should empty your smaller accounts just to please one big customer.
- Thirdly, take care of the what-ifs- Get aware of policies of when and how to get paid for your services. Get to know what steps to take in case you do not get paid. Make it clear to your customer if you want to charge interest if payment amounts get delayed for a certain number of days.
Do Your Own Review- Firstly, monitor accounts through your system. Secondly, correlate the extension of credit to customers. Analyze if it has changed your relationship with your customer for better or worse. Did it create inequality?
For instance, do your customers order the exact amount of products like before but now take longer to pay? Is it often right before the interest charges get applied?
If it’s the former, all you have to do is just to have a conversation. In other words, see if there should be more credit extended (if it makes sense for your cash flow).
If it’s the latter, consider having a discussion or winding down the credit line. Do so as your customer is now using you as an unpaid line of credit. Additionally, you get to decide if it makes any sense at all for your company. Above all, keep in mind that sometimes it does.
Advantages of Offering Credits to Your Customers
- Meet the competition
- Increase in your sales
- Better customer loyalty
Disadvantages of Offering Credits to Your Customers
- Negative impact on cash flow
- The need to fund accounts receivable
- Taking a risk with customers
- Having to keep up with accounts receivable
- Making potential bad debts (this may happen when the customer does not pay the amount due. Therefore, you have to incur the fees.)
Hopefully, till now, the improved tips and tricks have helped you in framing new credit policies.