Should You Offer Credit to Your Customers?

Business owners have a lot of decisions to make.

One basic decision is whether or not you will allow your customers to pay you later. If you get your money when you render your service or deliver your product, then there is no difference between earning money and getting money. You do not wait to get paid. This is the system for retail. For many of us though, our customers expect 30 days to pay.

Business owners sometimes end up offering credit by default. A customer says “ok if I pay your later?” And the new business owner says sure, when the correct answer would be “No.”

If you are dealing with large corporations, particularly multinational organizations, these groups expect to have 90 days to send payment to you. For a business owner who is not expecting to wait 90 days, this can be anything from an inconvenience to the end of a new business.

If you are going to offer credit then think about your policies. You need a way to decide which of your customers are worthy of getting credit. What criteria will you use? You have to decide what your terms are — 30 days, 60 days? Will you charge interest? Will you send clients to collection? Will you need to hire a big guy to visit your clients and personally ask for your money?

Once you are offering credit you are like a bank. So spend a little time working on the policies you need — you want to be paid for the work you do.