You Owe It To Yourself

Set up a credit strategy to make sure the check is in the mail.

You've developed an irresistible product, come up with an effective marketing plan, and you're ready to go. But wait! Though making the sale is great, the process isn't complete until you actually get paid.

Whenever a sale does not include an immediate cash payment, you are extending credit; whenever you extend credit, you are taking a financial risk. However, you can reduce that risk by developing and consistently applying sound credit strategies before you have a problem.

Begin with an understanding of the difference between consumer and commercial credit. Generally, if you extend credit to individuals, it's considered consumer credit; if your customers are other businesses, it's commercial credit. In most cases, checking credit and collecting from a commercial account is easier than from a consumer account. If your customers are individuals and you don't want to take the credit risk yourself, apply for credit card merchant status so you can accept various bank credit cards. Your banker can help with this process.

Of course, even accepting credit cards doesn't guarantee payment, because the customer has the right to dispute charges. Be sure you are clear on all your rights and responsibilities to both the consumer and the credit card companies, and implement procedures to ensure that each transaction is handled according to the appropriate policy.

Jacquelyn Lynn is a business writer who has specialized in marketing and management issues for more than a decade. She lives and works in Winter Park, Florida.

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This article was originally published in the October 1996 print edition of Entrepreneur with the headline: You Owe It To Yourself.

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