Should I Extend Credit To My Customers?



"Not until the pain of the same is greater than the pain of change will you embrace change." -Dave Ramsey

It's a common problem, and I've talked about it before: customers are asking you for lines of credit, or "special deals" when it comes to your AR. So you ask yourself: should I extend credit to my customers?

My recommendation? Don't do it. Tell them you accept credit cards.

The biggest problem about giving credit is that you end up spending more time collecting money. Time that could be more profitably used doing most anything else.

The second biggest problem is that some of your credit customers, no matter how big and prosperous they appear to be, will never pay you.  If the accounts/purchases/orders of those customers who don't pay you are big enough (or there are enough of them), you will be forced out of business.

If there is any chance that a customer may not pay you, it would be better not to make this sale. Time wasted collecting ... sleepless nights worrying about payment ... and real bottom-line losses are all inevitable outcomes of playing Russian Roulette with granting credit.

If you *do* slip into the credit-granting trap, be very clear about payment terms before delivery, and insist on any compliance to the day. Make a lot of constructive noise. Be persistent. Call every day. Visit your creditor in person. Let him know how important the money is to you. Wear him down. He is paying someone.

The person who gets paid earliest will be the person who showed the greatest determination to be paid. It should be you.

Collection is a critical survival tactic. Do everything in your power never to have to use it. But once you must, be absolutely resolute. It should be your first priority every day. If your experience is sufficiently unpleasant, perhaps you will understand the wisdom of not getting yourself into that corner in the future.

I'm grateful for our chance to serve you and your business -- and we are dedicated to its success. Which means we want to protect you from all of what could tear you down.

BE THE ROAR not the echo!



Janet Behm

Utah Real Estate Accountants


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