If you are running a business one of the ways to increase your sales is with the extension of credit. Many businesses extend credit and allow customers to make purchase with credit cards as a way to increase sales. If someone cannot make a purchase with cash then a company can offer credit terms designed to help themselves and the customer as well.
When a customer is able to make a purchase with a credit card they usually receive some easy to manage credit terms. Most credit cards allow you to make the minimum payment as opposed to the entire balance. If a customer cannot use a credit card to make a purchase a business may lose that sale to a competitor that does accept credit cards. Using credit cards is one way to increase your sales and grow your customer base. One of the things customers will look at when they are going to do business with a company is the credit terms offered by a particular company. You will find that most companies don’t do business on a cash basis only because they realize they are missing out on a substantial amount of income.
Issue your own company credit cards. Some businesses have their own company credit cards. Whenever credit is issued in this manner there is always the chance that customers will not pay. A company has to have a credit and collection department that functions at optimal efficiency to make sure that delinquent receivables are collected. It does no good to increase sales if the customers don’t pay. Most companies can determine are effective they are at extending credit based on their company credit card delinquency. If a company has no delinquency or very little delinquency then their credit policy is probably too strict which means they are losing sales. On the other hand if a company credit card delinquency is higher than the industry average there is a good chance that their credit card policy is too lenient.
They may need to re-evaluate their credit policy to make sure they are not extending credit to individuals that cannot afford to pay. Some of the primary characteristics that should be looked at, before credit is extended, is the individuals’ ability to pay, willingness to pay, and their stability. Ability to pay deals with how much money the customer Is making. Do they have the income that will allow them to be approved for a credit card? The customer’s willingness to pay centers on the customer’s past payment history. The credit policy should look at how a customer has paid their debts in the past. This information can usually be found by looking a a customer’s credit report. A customer’s stability is concerned with how long a customer has lived at their residence and worked at their job.