Relying on credit

For many businesses, credit is a fact of life. If you don't offer credit, you could be losing customers to competitors who do.

Poor credit control can greatly affect your cash flow – the lifeblood of your business – and your ability to pay your debts on time. Bad debts can increase the amount of interest you pay, shrink your profits and force your business to close its doors.

Factor in the costs

You can't afford to offer credit to your customers without including the cost of providing it in your prices. You can't expect to give better credit terms to your customers than you receive from your suppliers.

Remember! Credit is a two-way street. Your own credit rating is based on your ability to pay. You should judge your customer in the same way. Think of credit to a new customer as lending money.

There are procedures you can put in place to ensure you keep track of credit and minimise risks.

See the Rules of credit fact sheet in the Resources section of the Toolbox for more information.