There are two ways small businesses can compete with the “big guys.” One is by offering open terms with their sales; the other is by getting paid COD for their work. An oxymoron? Not quite. Remember: Cash is king!
There are many options to help a business stay competitive. One is to carry a credit line large enough to allow you not to miss sales. If you can’t do that, then know your customer’s credit and payment history, and be sure that your in-house accounting personnel are experienced or that you use a third party. You can also bypass knowing your customer’s credit and payment history and use outside financing resources. It’s also a good idea to offer credit card processing, and to factor in and insure your receivables. And if possible, do it all!
CASE: Turned down by their banks, a fresh fish supplier submitted their customer list to us for credit review. With the opportunity for a large contract with a new customer looming, we reviewed the contract and the customer and provided some cautions … which the supplier ignored until they were getting paid 75 days out. Don’t let this happen to you!