For a business it is important to have the option to extend credit or payment plans to customers or clients. Providing this option can generally drive up sales. This method of extending credit also increases the range of customers businesses can serve with their product or service in South Africa.
A good score will allow you as an individual to borrow more in future from the banks and similar places.
There are some risks for businesses to provide credit and payment plan options for customers. If the option is not evaluated and managed properly by businesses, the businesses risk losing money.
This article provides factors South African businesses can identify before extending credit or payment plans to customers.
What Credit or Payment Plan types can Businesses offer customers?
The type of credit plan that will be offered as a business:
What Credit risk is the Business exposed to?
Businesses need to understand what would happen if customers no longer pay in time or don’t pay the full amounts as part of a credit or payment plan agreement. This is referred to as Credit Risk.
If there are no timely payments or no full payments being met by the customer, this can affect the cash flow of a business. Having less cash means the business could start operating at a loss.
What Credit check processes can a Business apply to reduce Credit risk?
Businesses can use special companies that help them check on customers to see if the customers will be good payers for the credit plans the business provides.
Businesses can approach Credit Bureaus. These are companies which have histories on the customers’ payment habits and previous credit exposure. These histories will help a business determine which customer of theirs will be good to offer a special credit or payment plan to.
Fraudcheck can assist businesses in reducing credit risks by helping the business put a process in place for measuring the risk.
Fraudcheck can also assist a business by doing identity and credit checks on customers that the business wants to offer the credit services to.