Trade Credit

Offer established credit trade lines and cash discounts to increase profits Give a discount to cash customers to reduce credit costs and reward cash customers with the best price. The benefit of cash discounts, also called early payment discounts, rides on the payment period you set and the payment methods you accept. Generally, the business industry recognizes cash in its various forms excluding credit cards.

I recommend:  Take the Get Business Credit Now tutorial through Ark Refreshments to determine if trade credit will improve your business. Ark offers a fee-based six-month training program and coaching to implement a trade credit program that fits your company needs. Conduct the extension of trade credit with an application. Download the Credit Guru's sample credit application for guidelines.

Assess your client's credit risk and delegate trade credit loan management Consult a business credit bureau before extending credit to customers. Besides credit references and your direct client experience, credit bureau reports offer a snapshot of a client's creditworthiness and the state of the business. Enlist the help of a credit outsource company to manage your trade credit agreement, relieving you of the finer details of granting credit. Identifying your client's payment history creates sound trade credit decisions.

I recommend:  Research your client's business history through a business credit bureau such as Business Credit USA. You have to pay for their full service, but take advantage of their free trial to see the benefits for your company. Tracking your credit line accounts can be a business onto itself, so take the Trade Credit Express tour to see whether outsourcing trade credit would be more efficient that in-house credit granting.

Protect your profits with trade credit insurance Unforeseen events can turn a trustworthy client into a greater credit risk. Based on your business operating style, insurance can cover the cost of nonpayment of trade credit in business. While trade credit insurance reduces the effects of nonpayment, you first need to determine if your company's exposure is high enough to warrant the cost of coverage.

I recommend:  Calculate the monetary benefit of trade credit insurance with the Credit Insurance Cost/Benefit Analysis calculator. If you determine that it's economically beneficial, locate trade credit insurance providers through Creditworthy.