Surreal Entrepreneur

Credit is risk. Now that we have established that, a business owner needs to know that this isn’t a Utopian world. There are people that will take advantage of you and take your money as well. Not everyone is a shark, but we have to prepare for customers to have negative intentions so we can treat them as if they were Mother Theresa.

How do we limit risk when considering allowing our store to offer credit?

Firstly, I have had positive and negative experience with Purchase Orders. While some people have been incredibly efficient and responsive with filing the purchase orders with their companies in order to have the money set aside and ready once billed, other organizations and people were lackadaisical and this help up due money for months. This process should only be available to customers that not only have demonstrated the necessity for a long term partnership to show dedication to the relationship, but also have demonstrated the organization and will to get things done efficiently. This should only be extended with a very air-tight contract along with a storied relationship.
Also you as a business owner need to verify that the person you are extending credit to is tied to the region or area that you are in as well. Purchase orders are feasible between separate parties, but being able to knock on someone’s office door and ask for the status of the transaction is more powerful than a re-sent e-mail with a bill.

Lastly it might be beneficial, if you are in the position to do such, to hold the keys to the service, this doesn’t necessarily mean physically. For example, Pandora radio has a subscription service that I pay for yearly. They know that I’ve paid for an entire year, but they extend out a few days past the year that I’ve purchased hoping that I have the intention of purchasing another year. A lot of products and services have the ability for the manufacturer to access the product (online dashboard, computer, tablet, phone, etc) remotely, so the customer’s incentive to pay their debt is the daunting understanding that they could completely lose the use of that product if they don’t pay.

I would like to stress that relationships are the first thing to focus on when deciding to extend credit to a customers. If you have a reason to trust someone, they might just have a reason to pay you back.