 Sam
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Joined: 21 May 2005
Posts: 281
Location: CALIFORNIA
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 Posted: Thu Apr 08, 2004 11:32 pm Post subject: Customer Credit |
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Customer credit refers to an economic indicator prepared by the Federal Reserve. This measures the level of outstanding consumer installment debt on a monthly basis. This can be used together with real sales to detect whether cash or credit is fuelling growth.
Again, customer credit may also be considered as a business. There lies the inherent risk of non-payment, credit collection fees, adverse public relations and embarrassed customers taking their trade to the competition. The financial risks associated with customer credit can, however, be minimized by following certain rules. These are:
- Time and terms for payment, interest rates, if any, etc. should be clearly stated by the creditor and signed by the customers requesting credit.
- Collection of the minimum down payment at the time of purchase.
- Following some established standards for approval of credit. This is needed to check the grant of credit to customers having a history of late payment or poor credit record.
- Use of formal standard collection procedures or opting for the services of a collection agency can be useful in getting payments from customers.
- Motivating customers to clear overdue accounts through regular payments.
- Mailing/handing over the invoice for immediate payment.
- Offering some incentives for payments made before deadline. The amount due to be paid can be lowered by some percentage that serves as the incentive for early payments. This proves to be more beneficial than charging a penalty for late payments.
- Setting a maximum dollar credit limit, although it may be extended with change of situation on an individual basis.
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