management

When the economy slows, many businesses react by tightening up on credit approval. But is this the best response? After all, a recent survey tells us that 84% of UK companies sell over 80% of their goods and services on trade credit. The proportion of companies doing the same is even higher in countries such as France (86%), Poland (92%) and Germany (94%).

I’d suggest that a smart company can avoid losing out to competitors by making judicious use of the credit function to retain customers and gain new ones. For instance:

·          Could you add value for your existing customers by lowering the cost of doing business with you?

·          Would you accept a new customer to whom you would not normally extend credit, if you could find a way to minimise the risk?

·          If you had unused capacity and your product or service was in high demand, how would you feel about accepting a higher level of bad debt providing you could still make a profit overall?

Any other ideas for making positive use of the credit function during a downturn?

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