According to the U.S. Small Business Administration article “Extending Credit to Your Customers,” the benefit of extending credit to your customers is that you give them the option to purchase products or services today and pay for them at a later date. Another reason for having a credit policy is to build customer relationships. When you extend credit to customers through card payments, the credit card company manages the risk. When you extend credit through invoices or personal checks, you are responsible for verifying and accepting payments and managing the risks that come with them.
Further, when your business accepts credit card payments and personal checks or invoices customers, it is essentially extending credit on the assumption that customers have the funds to pay for the transaction. One way to help avoid problems with customer payments is by having a documented credit policy. Some tips for building a credit policy are gathering as much information about the person or company as you can, as well as having a credit agreement and/or running a credit check.
For more credit policy tips, download our whitepaper “Best Credit Policies: 5 Easy Steps to Get Started.” However, if you do encounter a problem with customer debt, you should consider working with a third party collection agency such as Optio Solutions, which through diplomatic and professional collection letters, collection calls, and other products/services, can assist you with your business’ debt collection needs.