Setting Your Credit Terms Carefully
It’s easy to buy products or services on credit terms these days – which means that anyone can sign up for a gym or fitness club membership today and not have to worry about payment two or four weeks later. The problem with setting up credit terms such as this is that while you may indeed enjoy a higher membership subscription rate, your business cash flow essentially hinges on the assumption that these customers have the funds to pay for the transaction at a later date (read more about extending credit terms here).
Who is Liable for Poor Credit Terms?
At first glance, it seems as though the only party who will suffer from poor credit terms is the buyer itself, but the truth is that a failed transaction will be bad for all parties involved. When a credit card is used to extend credit terms, the risk is undertaken by the credit card. When businesses like gyms or fitness clubs accept personal cheques as credit terms, the business itself will bear the risk of payment going through.
The reason why plenty of businesses continue to offer credit terms is because it entices potential customers to look past the pricing, enhances customer relations and increases the likelihood of sales being made. The biggest drawback to this practice though is that failing to set your credit terms carefully will make the world of difference between a healthy and empty cash flow situation. To decide if extending credit is right for your business, weigh the associated rewards and risks.
Direct debit providers like Ezypay are ideal solutions to companies and customers who are interested in purchasing via credit terms, but want the security of knowing that money will be transferred promptly to avoid poor cash flow problems.