Whether
or not you will be extending credit to your
customers in your home based business is a
decision you will eventually have to make.
Every business owner will have to write off
between 3 and 5 percent of debt as bad, as long
as debt is managed correctly. If you have just
started your home based business, cashflow is
very important, and so you do not want to
necessarily turn potential business away just
because you think if you go extending credit you
will not get paid. There are ways to help you
determine whether or not you should extend
credit in your home based business.
Some home based business
owners have a strict policy regarding up front
payment or even pay upon delivery payments.
However, if you want to keep your business
competitive, extending credit is one way of
increasing business. Extending credit, though,
does not mean you do it willy-nilly to anybody
who wants it. After all, some services or
products are worth a lot of money, and not
getting paid can cost your business
significantly.
Therefore, you need to take
some specific things into account when you are
considering extending credit to a client.
First, take a look at the character of your
client and their overall willingness to pay
debts. What is their history and your
experience with their management? Is there a
history of unpaid debt or litigation? Taking a
close look at the client can help you determine
whether extending credit is in your business’s
best interest.
While you are taking a
closer look at the character of the company when
determining whether or not you will be extending
credit to that client, you should also take a
close look at the financial capacity of the
company. The company’s character tells you if
the company will be willing to pay, but looking
at the financial capacity will tell you if they
are able to pay any debt.
When you are considering
extending credit to a particular client, finding
out the character and financial capacity of the
client comes easiest from having them fill out a
credit application and running a credit check.
Beware of extending credit to those clients that
balk at filling out a credit application, as
most reputable clients will understand your
concern. Also, double check credit references
on the application before you go extending
credit to your client.
Your policy on extending
credit is important here, as you need to know
what to do with the information you get from the
credit check. You need to know how much
negative information makes you uncomfortable
enough to not extend credit to that client, and
if you will be requiring pre-payment in full or
just partial payment. Also, if you do decide on
extending credit to the client, then you need to
make sure the payment terms are very clear.
Extending credit is not a
bad thing in your home based business. If you
know what you are looking for to determine
character and a client’s ability to pay, then
extending credit will be an easier process and
asset to your home based business.
Copyright © Charles Fuchs is an established Six
Figure Income earner and one of the top online marketer's. He specializes in
helping people start their very own
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at Home and Home Based Business on the internet.
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anytime through email or messenger. I am here to
help you ;-)
Charles Fuchs
Vision Management Enterprise Inc.
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