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Accepting Payment Online - 7 Steps to Improve your Customer's Buying Experience
Copyright 2005 John Tedeschi
Of course, the number one way you can improve your client's
online purchasing experience is to accept credit cards on your
site, because most of your clients will prefer to use their
debit or credit card, rather...
Do Customers Trust Your Website?
How often do you think about trust in terms of your website? You think about the content you put on it, the look and feel, the quality of the messaging. But if visitors to your website don't trust you, they won't become your customers.
How...
Evaluating Your Customer
It is one thing to make a sales presentation, but it is another thing to make a sales presentation without first evaluating your customer. For all you know, you could be selling your customer something that they already have, or something they dont...
First Contact: The Source of Customer Loyalty
With customers being smarter, more cost conscious, more product knowledgeable and more demanding, improving customer service has become a major focus within many businesses. In Customer Satisfaction is Worthless; Customer Loyalty is Priceless,...
ForGive All Ebay Sins: Why Bad Customer Service Can Cost You Money!
Over the years, I have been amazed at the “blinding” greed and reckless approach to commerce that some business owners have employed. Lying to customers, selling inferior merchandise, and not offering refunds, left a firestorm of irate customers...
Getting And Keeping Customers
This is why you have a site in the first place, right? The idea is to make money, to get customers and keep them. There are some things you are going to have to do to accomplish this. Take a good, hard look at your website. Are there pictures of...
How to Build Customer Trust in your Auctions!
Whether you realize it or not you may be giving your auction
visitors a reason not to buy your product or service. And it
could be just the smallest of issues that will cause them to
think twice about purchasing from your auction. As explained...
How To Hit The Competition Without Losing The Customer
Get over it! If you run any type of business, you're going to have competitors. Even if your product or service is a unique one, soon you'll have copycat products start surfacing. Competition is therefore just a fact of business life and one of the...
It's all about the customers, baby
You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. Please print the article in its entirety unchanged and notify the author by email when you use it ~*~ IT'S ALL ABOUT...
The Eight Rules of Good Customer Service
The Eight Rules of Good Customer Service
If the Bill of Rights was written today, it would likely include
the right to complain.
Americans love to complain, but who can blame us? For the most
part, customer service has been heading...
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Trade Credit: How to determine if you should offer net-30 terms to your customers
What is trade credit?
One of the major differences between consumer and commercial transactions is that most, if not all, consumer transactions are paid in cash or by credit card at the time of sale. Because of this, most consumer businesses never have to worry about extending credit to a customer and can run their operations on an “all cash” basis. This allows them to focus on their core competencies because they don’t have to carry slow paying Accounts Receivables and go through the expense of collecting on such accounts.
However, commercial transactions are different. Most clients ask their suppliers to deliver services immediately and then to invoice them for the work, payable 30 days later (also known as offering net-30). In effect, clients ask their suppliers provide them with “trade credit” for 30 days. Although suppliers don’t like offering trade credit, most have accepted it as an industry standard and have learned how to operate and live with it. In fact, some suppliers have even mastered how to offer trade credit and use it to better position their companies with leading clients. Large creditworthy customers, such as the government or large companies, will usually demand trade credit as part of their contract negotiations. Some examples of entities that ask for 30 to 60 day payment terms are:
o Fortune 500 companies
o Large and medium sized companies
o State government agencies
o Federal government agencies
On the positive side, providing trade credit to the proper clients can be a tool that allows your company to win important contracts and position it for growth. However, providing credit is also risky and can erode the company’s cash position if it is misused. Furthermore, offering trade credit to less-than-creditworthy clients can burden the company with bad debt and affect its growth prospects. Because of this, business owners must walk a fine line balancing their desires to grow their businesses with the necessities of offering credit to their customers.
Keys to providing trade credit successfully
The best way to minimize the risk of providing trade credit to a client is to perform a credit analysis on him. Although no credit analysis is 100% perfect, they allow business owners to make an informed decision on whom to issue credit to. Here are the three key points to making a credit analysis.
o Have the customer fill out a credit application
Have all your customers that want credit fill out a simple credit application. This will allow you to have all relevant facts in a single document. The application should ask for the following information:
1. Company structure
2. Banking relationships
3. Commercial references
4. Supplier references
o Check bank and supplier references
In their credit applications most clients will only list banking and commercial relationships that will position them in a favorable light - however - it is always a good idea to check on all of them anyway. Banks will only be able to confirm that the client has an account with them. Supplier references, however, may provide critical information regarding the clients’ payment habits.
o Check commercial credit reports
There are a number of companies that sell commercial credit reports
on businesses. As opposed to consumer credit reports that require special permissions, commercial credit reports can be obtained for any business without asking for prior permission. Reports vary in their level of detail and accuracy and can be obtained for as little as a few dollars. However, all reports will include important information to help your credit department make a decision. More detailed reports will cost a few hundred dollars. You can obtain credit reports from the following companies:
a) Dun & Bradstreet (www.dnb.com)
b) Experian (www.experian.com)
c) Credit.net (www.credit.net)
Doing a credit analysis on your clients will allow you to determine how much – if any – trade credit you can give them. Clients that do not have a favorable credit analysis should be placed on a COD (Cash On Delivery) basis, at least initially, to reduce the risk of non-payments.
The challenges of offering trade credit
One of the main drawbacks of providing trade credit is that it can create a cash flow problem for the company that offers it. Large suppliers with adequate cash cushions in the bank can easily afford to offer credit. However, small suppliers with lean bank accounts usually find that offering credit will drain their cash resources and create financial challenges. It is not uncommon for small businesses to find themselves with a cash flow gap after offering trade credit to their larger clients. This gap is created by the fact that the company’s Accounts Receivable account is strong while the company’s bank accounts and cash position are weak. The cash flow gap places the business at risk of missing payroll and debt payments. It also prevents it from pursuing new opportunities because they don’t have the funds to buy resources or hire the necessary staff.
Bridging the “cash flow” gap
The biggest asset that most new businesses have, aside from their equipment and intangibles (e.g. employees), is their unpaid invoices or Accounts Receivable. Accounts Receivable is an asset that can be quickly converted into cash by using a financial tool called factoring. Factoring allows a business to sell the financial rights to their Accounts Receivable to a third party, called a Factor. As part of the sale, the factor immediately advances a large portion of the cash value of the unpaid invoices to the business. The business can then use this cash infusion to strengthen its cash position and meet its obligations. In the meantime, the factor, which now owns the invoices, waits to get paid by the customer. Factoring enables business owners to outsource their trade credit function to the factor and to turn their companies into the equivalent of an “all cash” business. If you want to learn more about factoring and how it can be used to grow your business, please read our white paper titled “Factoring: Cash on Demand for your business without debt or loans”
About Commercial Capital, LLC
Commercial Capital, LLC is a leading commercial finance company that specializes in providing working capital through factoring to small businesses. For more information or a free consultation, please visit our web site at http://www.ccapital.net or call us at (786) 206 4722.
Copyright Marco Terry - http://www.ccapital.net
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