Offering credit to your customers can be rewarding and at the same time, very risky. You need to weigh the advantages and disadvantages of offering credit to customers. In this post, we review the top secrets to ensure successful retail consumer financing. Thus, if you are planning to offer customers credit, this post shares the hacks to put into consideration for a successful customer financing program.
Table of Contents
1. Embrace Technology
Offering credit for customers is not as simple as it may seem. However, there is so much to running a successful credit program than just keeping a record of who owes what. Luckily, the technology exists to assist you in managing credit programs. For instance, with advanced technologies like Artificial intelligence, you can determine creditworthiness. Therefore, if a customer is not likely to repay your loan, you can avoid extending credit to such customers. Technology also helps in identity verification. Thus, by running an identity verification, the business owner is assured they are lending to authentic persons.
2. Ensure Customer Background Checks Before Offering Credit
Before you have offered credit to customers, it is advisable that you run background checks. As illustrated above, technology can help businesses to run accelerated insight programs that help to ensure lending to the right customers. Therefore, the background checks include verifying the customer’s ability to repay the loan. Do not lend any money until you have verified that the customer meets the minimum credit requirements.
3. Consider Checking References
You could call other vendors to find out whether the customer pays bills on time. For instance, if a customer is blacklisted by other vendors, it does not make sense to lend to the customer, unless you have proper security to be assured you will be repaid. Doing credit checks gives you a sense of whether you are dealing with a risky customer, or finding out the chances of getting repaid promptly.
4. Do Not Extend Too Much Credit
Too much credit could affect your cash flow. Therefore, it is advisable that you avoid offering too much credit at all times. Consider keeping proper records showing how much is owed, and how much has been repaid so far. If the repayments and new credit are balancing appropriately, you can keep offering credit but at moderate patterns. Otherwise, if the credit is surpassing repayments, you could be running to a cash flow problem.
5. Embrace Record Keeping
Record keeping is a critical factor when it comes to the management of your credit program. With proper record keeping, it is possible to track unpaid debts and even establish your own creditworthiness tracking system. Proper record-keeping involves ensuring the safety of the credit records. Therefore, if you are recording credit in manual systems, there is the risk of losing the records through an internal fraud or even risk of fire or natural catastrophe destroying the records. In that regard, it works best if you keep your records on a secure platform. With cloud computing, you can access your business records from anywhere.
6. Proper Repayments Reconciliation
You need to invest in a system that records and updates credit files in real-time. When a repayment has been made, you should take note of the repayment immediately, to avoid a situation where your debt recovery team is following customers who already repaid. A situation where you are chasing customers who already repaid could be embarrassing and even affects the business reputation. However, with a proper credit reconciliation system, it becomes possible to keep track of every credit entry.
7. Focus on Growing Your Cash Reserves
To avoid getting into cash flow traps, establish a good cash reserve. A strong cash reserve ensures you have enough money to operate your business even when the credit is high. Otherwise, you may not have money to pay your staff and repay the suppliers, in case of deferred repayments.
Conclusion
We have looked at the important tips to help you in running a successful credit program. one of the critical components is to embrace technology. With AI-powered systems, you can run a successful credit program.