Use Extreme Caution in Extending Credit
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Use Extreme Caution in Extending Credit
Wood Products Manufacturers Association has been in existence since 1929 to help companies grow their business and remain competitive in today’s global environment. We would like to discuss the importance of using caution when extending credit to customers. Profit margins are slim or non-existent today. In order to remain in business, companies must get paid for their products and services provided.
We have been hearing from more and more members who are having difficulty collecting from new customers. Why is this? Difficulty collecting from new customers can be due to many factors. One of the main reasons is that more and more businesses are operating off of cash flow. When a customer cannot remain current with suppliers, they will look for new suppliers, but if they are not current with their suppliers it will report negatively to the consumer reporting agencies. When a current customer is declined for additional credit that’s when they look for additional suppliers. Most of the time suppliers can keep up with their demand. The faster business picks up, the more difficult it can become to collect from customers.
So what can you do? You must remember to ask for a minimum of four current suppliers, and do thorough credit checks with all 3 credit bureaus on any new accounts. The three consumer reporting agencies are: Equifax, Experian and TransUnion. Customers past payment history can be a good indicator of how they could pay you in the future. If you are a manufacturer, you should know that if customers have credit and receivables insurance, these invoices are protected by the insurance company and do not count against their credit line if they have one.
Profit margins are very slim today, and we have look for the best ways to save your business money. Companies are working too hard to remain profitable. We want to continue to help you work smart.
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