6 post(s) found
ExtendCredit.com Blog
Creating New Payment Plans - Part 2
This is the fourth installment in our series, "Establishing Best Practices for Extending Credit in Today's Economy."
In our previous blog post, we discussed strategies to consider in developing your customer credit program. One of these is deciding which procedures or types of transactions to include in the program and what types of customers will be eligible for credit.
In this blog post, we will focus on the second part: deciding which types of customers will be eligible for credit.
Strategies for Assessing Credit Risk
When it comes to deciding who is eligible for extended payment terms and who is not, the decision should be based on a defined business strategy for offering credit and then on criteria that is consistently applied to all applicants.
First, let’s discuss strategies for offering credit. A properly designed credit program serves a business purpose. This may be to stimulate sales, provide a financing option to customers, or supplement an outside financing program. Within the context of the business purpose, a decision should be made regarding how much credit risk is acceptable.
For example, if the business purpose is to stimulate sales of a service, but stringent criteria are set for credit approval, the business may find a higher than desired percentage of applicants is declined. On the other hand, setting more lenient credit criteria may result in higher missed payments and bad debt situations. That said, it may be acceptable if the service is highly leveraged in terms of cost of sale, and the increased business volume generates additional profits that justify the bad debt dollar risk.
Credit risk should be assessed based on the business purpose and should be well understood prior to commencing the program. The business should develop financial models around the program to establish performance benchmarks that are monitored. Adjustments should be made along the way if performance is deviating from the benchmarks so that the business purpose is achieved as originally envisioned.
The second aspect of assessing credit risk is the consistent application of credit criterion to all applicants. This seems like a simple concept, but unfortunately, one that is often not followed. This can be avoided, by establishing clear, written credit criterion and a monitoring process to enforce policy compliance and external lending rules.
Effective Automation is Key
Automating the credit application, approval/denial process, and credit agreement stages of the payment plan process ensures consistency and can enforce best practices. Automation can go as far as to define the business rules for the credit granting process so that the approval/denial tasks are executed consistently irrespective of the individual processing the application.
One of the key aspects of the credit review and approval process is running credit and identity verifications on each applicant to obtain information regarding their credit worthiness while verifying his/her identity. An integrated, real-time service should be a required feature of any automated lending system.
Effective automation not only eliminates error-prone manual processes it can enforce lending best practices and significantly reduce the workload for existing staff. A robust, easy-to-use system provides a rich set of capabilities to maximize results even for a small business with limited staff.
In our next blog post on "Establishing Best Practices for Extending Credit in Today's Economy," we will more fully explore best practices for ensuring prompt payments.
In our previous blog post, we discussed strategies to consider in developing your customer credit program. One of these is deciding which procedures or types of transactions to include in the program and what types of customers will be eligible for credit.
In this blog post, we will focus on the second part: deciding which types of customers will be eligible for credit.
Strategies for Assessing Credit Risk
When it comes to deciding who is eligible for extended payment terms and who is not, the decision should be based on a defined business strategy for offering credit and then on criteria that is consistently applied to all applicants.
First, let’s discuss strategies for offering credit. A properly designed credit program serves a business purpose. This may be to stimulate sales, provide a financing option to customers, or supplement an outside financing program. Within the context of the business purpose, a decision should be made regarding how much credit risk is acceptable.
For example, if the business purpose is to stimulate sales of a service, but stringent criteria are set for credit approval, the business may find a higher than desired percentage of applicants is declined. On the other hand, setting more lenient credit criteria may result in higher missed payments and bad debt situations. That said, it may be acceptable if the service is highly leveraged in terms of cost of sale, and the increased business volume generates additional profits that justify the bad debt dollar risk.
Credit risk should be assessed based on the business purpose and should be well understood prior to commencing the program. The business should develop financial models around the program to establish performance benchmarks that are monitored. Adjustments should be made along the way if performance is deviating from the benchmarks so that the business purpose is achieved as originally envisioned.
The second aspect of assessing credit risk is the consistent application of credit criterion to all applicants. This seems like a simple concept, but unfortunately, one that is often not followed. This can be avoided, by establishing clear, written credit criterion and a monitoring process to enforce policy compliance and external lending rules.
Effective Automation is Key
Automating the credit application, approval/denial process, and credit agreement stages of the payment plan process ensures consistency and can enforce best practices. Automation can go as far as to define the business rules for the credit granting process so that the approval/denial tasks are executed consistently irrespective of the individual processing the application.
One of the key aspects of the credit review and approval process is running credit and identity verifications on each applicant to obtain information regarding their credit worthiness while verifying his/her identity. An integrated, real-time service should be a required feature of any automated lending system.
Effective automation not only eliminates error-prone manual processes it can enforce lending best practices and significantly reduce the workload for existing staff. A robust, easy-to-use system provides a rich set of capabilities to maximize results even for a small business with limited staff.
In our next blog post on "Establishing Best Practices for Extending Credit in Today's Economy," we will more fully explore best practices for ensuring prompt payments.
Creating New Payment Plans - Part 1
This is the third in our series, "Establishing Best Practices for Extending Credit in Today's Economy".
In our previous Best Practices’ blog post, we discussed the value of developing a written plan for extending credit and formalizing the credit process. As part of developing an overall strategy behind offering credit to your customers, you should decide which procedures or types of transactions to include in the program and what types of customers will be eligible for credit.
In this blog post, we will focus on the first part: deciding which procedures or types of transactions to include in the program.
Leveraged Transactions
Leveraged transactions or procedures of all sizes are good candidates for selling on credit terms. Why? Because the fee you charge is high compared to the hard cost you incur to provide the service or procedure. Couple this with requiring a down payment and/or charging interest over the term of the payment plan, and lending risk can be minimized or eliminated, while growing the business and generating a high level of wealth creation for the owner(s).
Let’s look at an example from the dental market and also compare this to the results you obtain using outside of third-party financing.
To start, outside financing may seem attractive on the surface because the dentist gets paid immediately. If the need for immediate cash flow is critical to the dentist, an outside financing program is an option that should be considered. However, the dentist does take a discount on their fees and the lender will only approve certain patients. Also, only certain procedures are eligible for financing often at less than 100 percent financing. As a result, the dentist's revenue potential from the highly leveraged procedure is severely limited because the outside finance company dictates who gets financed and how much is covered. Considering that highly leveraged procedures are a good way to grow a practice and create wealth for the dentist, outside financing is not the best option for achieving these goals.
It's interesting that service providers, such as dentists, are willing to take, for example, a 10 percent discount on their fees which happen to be 28 percent of their profits (based on the national average overhead of 73 percent). This isn't generating wealth for the dentist rather it is reducing profits.
Using an outside finance source for a $10,000 procedure nets them $9,000. Performing three of these procedures costs the dentist $3,000 in discount fees, while netting them $27,000 in cash.
Compare that to the dentist extending his own credit and charging interest over the term of the payment plan. Patient payments over 60 months with 18 percent interest would equal $15,236. Two patients would equal $30,742, which is actually more than the dentist receives from the outside financing company for three patients. If all three patients pay off their payment plans, the dentist would receive $45,708, which is $18,708 more than he would receive from the outside finance company. If the dentist averages three procedures a month, he/she would generate approximately $225,000 in additional income compared to the 28 percent reduction in profit by using an outside finance company.
Outstanding Receivable Balances
In certain situations, extending payment terms to an outstanding receivable account often is a more effective and less expensive option than sending the account to outside collections. This is called "soft collections."
In today's economy, many people want to pay their bill, but often lack the resources to make a single large payment. Affordable monthly payments are an attractive option for these people. If sent to outside collections, the agency generally suggests a payment plan as a first option in the collections process. For this, the business pays a 25 to 35 percent collections’ fee on what is collected. If the business extends its own payment terms, it saves the collections’ fee, while still receiving payments.
For example, assuming 10 accounts each with $3,000 balances due were sent to an outside collections agency. At best the company would net between $19,500 and $22,500 of the total $30,000 outstanding. Adding to the cost, often collections agencies only collect on 40 percent of the accounts worked, which further reduces the business’s net to $7,800 to $9,000 of the $30,000 outstanding. This translates into $0.26 to $0.30 cents on the dollar being paid to the business.
Compare that to extending your own credit based on terms that your customer can afford. You have two options for approaching this opportunity: 1) run credit checks on the account owner prior to extending terms; 2) extend the same terms to everyone without credit checks. If you run credit checks on accounts prior to extending terms, the terms offered can vary based on credit risk. This would include term and interest rate charged. If the situation doesn't warrant this approach, extending terms that cover the perceived risk for the entire pool of accounts may be a simpler and better way to go.
Using our example, assume that standard terms are used that offer a 6-month term and 18 percent interest rate. If everyone pays, the business receives the full $30,000 due plus $1,595 in interest income. Comparing this to the outside collections option, the payments received from just 3 out of the 10 accounts is more than what would be received from the collections’ agency. That provides a 70 percent upside to the business that extends its own credit terms. Further, if the accounts do default, the business can still send those accounts to an outside collections agency.
Effective Automation is the Key
While extending your own credit for leveraged services and receivable balances offer enticing advantages over outside financing or collections services, trying to manage the process manually can substantially increase risk and place a large burden on existing staff. Using a software solution that automates the entire process lifecycle delivers significant benefits.
Effective automation not only eliminates error-prone manual processes it can enforce lending best practices and significantly reduce the workload for existing staff. A robust, easy-to-use system provides a rich set of capabilities to maximize results even for a small business with limited staff.
In our next blog post for "Establishing Best Practices for Extending Credit in Today's Economy," we will more fully explore best practices for deciding what types of customers are eligible for credit.
In our previous Best Practices’ blog post, we discussed the value of developing a written plan for extending credit and formalizing the credit process. As part of developing an overall strategy behind offering credit to your customers, you should decide which procedures or types of transactions to include in the program and what types of customers will be eligible for credit.
In this blog post, we will focus on the first part: deciding which procedures or types of transactions to include in the program.
Leveraged Transactions
Leveraged transactions or procedures of all sizes are good candidates for selling on credit terms. Why? Because the fee you charge is high compared to the hard cost you incur to provide the service or procedure. Couple this with requiring a down payment and/or charging interest over the term of the payment plan, and lending risk can be minimized or eliminated, while growing the business and generating a high level of wealth creation for the owner(s).
Let’s look at an example from the dental market and also compare this to the results you obtain using outside of third-party financing.
To start, outside financing may seem attractive on the surface because the dentist gets paid immediately. If the need for immediate cash flow is critical to the dentist, an outside financing program is an option that should be considered. However, the dentist does take a discount on their fees and the lender will only approve certain patients. Also, only certain procedures are eligible for financing often at less than 100 percent financing. As a result, the dentist's revenue potential from the highly leveraged procedure is severely limited because the outside finance company dictates who gets financed and how much is covered. Considering that highly leveraged procedures are a good way to grow a practice and create wealth for the dentist, outside financing is not the best option for achieving these goals.
It's interesting that service providers, such as dentists, are willing to take, for example, a 10 percent discount on their fees which happen to be 28 percent of their profits (based on the national average overhead of 73 percent). This isn't generating wealth for the dentist rather it is reducing profits.
Using an outside finance source for a $10,000 procedure nets them $9,000. Performing three of these procedures costs the dentist $3,000 in discount fees, while netting them $27,000 in cash.
Compare that to the dentist extending his own credit and charging interest over the term of the payment plan. Patient payments over 60 months with 18 percent interest would equal $15,236. Two patients would equal $30,742, which is actually more than the dentist receives from the outside financing company for three patients. If all three patients pay off their payment plans, the dentist would receive $45,708, which is $18,708 more than he would receive from the outside finance company. If the dentist averages three procedures a month, he/she would generate approximately $225,000 in additional income compared to the 28 percent reduction in profit by using an outside finance company.
Outstanding Receivable Balances
In certain situations, extending payment terms to an outstanding receivable account often is a more effective and less expensive option than sending the account to outside collections. This is called "soft collections."
In today's economy, many people want to pay their bill, but often lack the resources to make a single large payment. Affordable monthly payments are an attractive option for these people. If sent to outside collections, the agency generally suggests a payment plan as a first option in the collections process. For this, the business pays a 25 to 35 percent collections’ fee on what is collected. If the business extends its own payment terms, it saves the collections’ fee, while still receiving payments.
For example, assuming 10 accounts each with $3,000 balances due were sent to an outside collections agency. At best the company would net between $19,500 and $22,500 of the total $30,000 outstanding. Adding to the cost, often collections agencies only collect on 40 percent of the accounts worked, which further reduces the business’s net to $7,800 to $9,000 of the $30,000 outstanding. This translates into $0.26 to $0.30 cents on the dollar being paid to the business.
Compare that to extending your own credit based on terms that your customer can afford. You have two options for approaching this opportunity: 1) run credit checks on the account owner prior to extending terms; 2) extend the same terms to everyone without credit checks. If you run credit checks on accounts prior to extending terms, the terms offered can vary based on credit risk. This would include term and interest rate charged. If the situation doesn't warrant this approach, extending terms that cover the perceived risk for the entire pool of accounts may be a simpler and better way to go.
Using our example, assume that standard terms are used that offer a 6-month term and 18 percent interest rate. If everyone pays, the business receives the full $30,000 due plus $1,595 in interest income. Comparing this to the outside collections option, the payments received from just 3 out of the 10 accounts is more than what would be received from the collections’ agency. That provides a 70 percent upside to the business that extends its own credit terms. Further, if the accounts do default, the business can still send those accounts to an outside collections agency.
Effective Automation is the Key
While extending your own credit for leveraged services and receivable balances offer enticing advantages over outside financing or collections services, trying to manage the process manually can substantially increase risk and place a large burden on existing staff. Using a software solution that automates the entire process lifecycle delivers significant benefits.
Effective automation not only eliminates error-prone manual processes it can enforce lending best practices and significantly reduce the workload for existing staff. A robust, easy-to-use system provides a rich set of capabilities to maximize results even for a small business with limited staff.
In our next blog post for "Establishing Best Practices for Extending Credit in Today's Economy," we will more fully explore best practices for deciding what types of customers are eligible for credit.
$20 billion spent on veterinary bills in 2010
I was reading an interesting article in Smart Money titled, "The $20,000 Pet" today. As quoted in the article, a report by market-research company Packaged Facts stated that Americans spent $20 billion on veterinary bills in 2010 — an 8.5% increase from a year earlier and more than double the amount spent just a decade ago. It went on to say that pet owners often don't argue when a vet recommends treatment for a beloved pet. Stating that a recent survey by the Associated Press and Petside.com found that 35% of pet owners said they were very likely to pick up $2,000 in vet costs to treat a sick dog or cat, while 22% said they'd pick up $5,000 in vet costs. Much of that money is being spent on new medical technology.
The article goes on to point out that pet insurance is benefiting from this trend and becoming more popular with pet owners which is driving up premiums more than 20% annually. Still, pet insurance is used by a small percentage of pet owners and the benefits offered are limited in many cases. So all this begs the question, "how do pet owners afford these new high cost services?" Conversely, "what should veterinary practices do to promote these high tech procedures and attract these more valuable customers?"
Pet care financing is the solution. Veterinary practices and Animal Hospitals that are on the leading edge of offering these procedures based on new medical technology understand the need to offer financing to their customers.
The article goes on to point out that pet insurance is benefiting from this trend and becoming more popular with pet owners which is driving up premiums more than 20% annually. Still, pet insurance is used by a small percentage of pet owners and the benefits offered are limited in many cases. So all this begs the question, "how do pet owners afford these new high cost services?" Conversely, "what should veterinary practices do to promote these high tech procedures and attract these more valuable customers?"
Pet care financing is the solution. Veterinary practices and Animal Hospitals that are on the leading edge of offering these procedures based on new medical technology understand the need to offer financing to their customers.
Getting Organized to Extend Credit
This is the second in our series, "Establishing Best Practices for Extending Credit in Today's Economy".
According to a 2008 survey conducted by GfK Roper Public Affairs and Media, when faced with a medical expense over $1,000, one out of 10 people surveyed stated that they would seek a payment plan/monthly payments from the service provider to help in paying the expense. This was before the impact of the credit crisis was really felt by the general population.
Today, one can assume, if asked the same question again, that a higher percentage of people would seek payment assistance in the form of a payment plan. If your business recognizes the need to extend credit terms to your customers, you probably also realize that it would be a good idea to have a plan in order to execute successfully and avoid unnecessary repayment risk.
There are several areas to consider when getting organized to extend credit. In this blog post, we will highlight "best practices" to assist you in successfully extending credit to your customers.
Develop a Written Plan
A plan defines the goal behind offering credit terms, a roadmap for everyone to follow in executing the plan, as well as the metrics to measure its success. Putting it down on paper forces you to really think about what is involved, offers you the ability to get valuable feedback before implementing, and the ability to share it with everyone on your team. This ensure that it is properly executed.
Understand Lending and Privacy Compliance Requirements
Extending credit terms is lending and is, therefore, subject to a number of state and federal consumer lending and privacy laws and regulations. It is a best practice to seek out professional advice to understand your role and obligation regarding these laws and regulations. Topics to cover include collecting and handling personal information from applicants, making credit decisions, using a credit agreement, collecting payments, handling missed payments, and use of outside collections services.
There is a lifecycle to extending credit with many steps along the way. Minimizing risk associated with compliance, while at the same time ensuring a positive experience for your customers, requires some planning across the entire lifecycle. Automation across the entire lifecycle can greatly simplify compliance and dramatically reduce the overall risks involved extending credit successfully.
Formalize Credit Processes
Formalizing the various processes involved in extending credit aids in compliance, ensures that credit criteria are applied consistently for all applicants, and creates written documentation needed to process and enforce the credit agreement with the borrower. Specific areas to consider include the application process, the credit application and credit agreement forms, borrower communications, document retention and record storage polices, credit evaluation and approval, missed payment policies, and default resolution. Automation and written guidelines for staff to follow are best practices to achieve these objectives.
Effective Automation is the Key
When you hear or read stories about businesses that have had negative experiences with extending credit to their customers, it is often because they weren't organized and didn't apply best practices to the overall process. Unfortunately, even in cases where good procedures and policies are defined, execution using manual processes often proves time-consuming and error-prone. When staff turnover is factored into the equation consistently, applying best practices to extending credit becomes more difficult.
Effective automation of the ENTIRE lifecycle is the key to success. Supported by written policies and procedures it greatly reduces risk by simplifying compliance, enforcing best practices, eliminating manual processes, enforcing consistency, and providing business intelligence at every stage of the lifecycle and across all credit accounts. Effective automation makes it possible for even small businesses with limited staff to be highly successful extending credit to their customers.
In our next blog post for "Establishing Best Practices for Extending Credit in Today's Economy," we will explore best practices for creating new payment plans in more detail.
According to a 2008 survey conducted by GfK Roper Public Affairs and Media, when faced with a medical expense over $1,000, one out of 10 people surveyed stated that they would seek a payment plan/monthly payments from the service provider to help in paying the expense. This was before the impact of the credit crisis was really felt by the general population.
Today, one can assume, if asked the same question again, that a higher percentage of people would seek payment assistance in the form of a payment plan. If your business recognizes the need to extend credit terms to your customers, you probably also realize that it would be a good idea to have a plan in order to execute successfully and avoid unnecessary repayment risk.
There are several areas to consider when getting organized to extend credit. In this blog post, we will highlight "best practices" to assist you in successfully extending credit to your customers.
Develop a Written Plan
A plan defines the goal behind offering credit terms, a roadmap for everyone to follow in executing the plan, as well as the metrics to measure its success. Putting it down on paper forces you to really think about what is involved, offers you the ability to get valuable feedback before implementing, and the ability to share it with everyone on your team. This ensure that it is properly executed.
Understand Lending and Privacy Compliance Requirements
Extending credit terms is lending and is, therefore, subject to a number of state and federal consumer lending and privacy laws and regulations. It is a best practice to seek out professional advice to understand your role and obligation regarding these laws and regulations. Topics to cover include collecting and handling personal information from applicants, making credit decisions, using a credit agreement, collecting payments, handling missed payments, and use of outside collections services.
There is a lifecycle to extending credit with many steps along the way. Minimizing risk associated with compliance, while at the same time ensuring a positive experience for your customers, requires some planning across the entire lifecycle. Automation across the entire lifecycle can greatly simplify compliance and dramatically reduce the overall risks involved extending credit successfully.
Formalize Credit Processes
Formalizing the various processes involved in extending credit aids in compliance, ensures that credit criteria are applied consistently for all applicants, and creates written documentation needed to process and enforce the credit agreement with the borrower. Specific areas to consider include the application process, the credit application and credit agreement forms, borrower communications, document retention and record storage polices, credit evaluation and approval, missed payment policies, and default resolution. Automation and written guidelines for staff to follow are best practices to achieve these objectives.
Effective Automation is the Key
When you hear or read stories about businesses that have had negative experiences with extending credit to their customers, it is often because they weren't organized and didn't apply best practices to the overall process. Unfortunately, even in cases where good procedures and policies are defined, execution using manual processes often proves time-consuming and error-prone. When staff turnover is factored into the equation consistently, applying best practices to extending credit becomes more difficult.
Effective automation of the ENTIRE lifecycle is the key to success. Supported by written policies and procedures it greatly reduces risk by simplifying compliance, enforcing best practices, eliminating manual processes, enforcing consistency, and providing business intelligence at every stage of the lifecycle and across all credit accounts. Effective automation makes it possible for even small businesses with limited staff to be highly successful extending credit to their customers.
In our next blog post for "Establishing Best Practices for Extending Credit in Today's Economy," we will explore best practices for creating new payment plans in more detail.
The Need for Extending Credit is More Important Than Ever
This is the first in our series, "Establishing Best Practices for Extending Credit in Today's Economy".
Successful businesses in elective healthcare, dental care, and veterinary services use customer financing to maintain and grow their sales. Like accepting different forms of payment, such as credit cards, extending credit is becoming more popular as another method to help close a sale, while enabling customers to financially secure services they would otherwise not be able to afford.
Unfortunately, given the current tighter credit standards and the increase in consumers with FICO scores under 650, access to consumer financing has become significantly limited making the financing that is available more expensive for these businesses. For example, approval rates for traditional financing through credit cards or lending institutions have seen a significant double-digit decline causing many consumers to forego non-essential elective healthcare services and creating a significant revenue decline for elective healthcare providers.
The credit crisis has also impacted many other B2C industries, such as education, legal, home improvement, luxury goods & services, and others that suffer from the lack of effective third party financing.
DIY - extend your own credit
The choice for many businesses is between offering their own payment terms or doing nothing, forgoing the much-needed revenue and crossing their fingers that the economy will improve soon.
As a result, many businesses are now turning to extending credit via internally funded payment plans as a way to close the gap and create a "win-win" for their business and their customers.
Extending credit through payment plans is hardly a new concept. For many types of businesses this is an accepted and well-understood practice that has helped them grow their sales and maintain customer loyalty. And, importantly, steady cash flow.
Many businesses that are considering a program to extend credit through offering their own payment plans have little experience in setting it up. Others, that already offer credit through payment plans struggle with manual processes that are time consuming and error-prone. For both, we recommend establishing credit practices using a "best practices" approach.
Establish a purpose for extending credit
Credit terms enable customers to focus less on prices, enhance customer relations, and have the potential to generate new sales. But before jumping in, the question needs to be asked: "Is it necessary to extend credit to maintain or increase sales?" Answering this question helps to define the purpose for an effective credit program and can establish milestones for measuring the program's success.
Extending credit is an effective way to close the financing gap and give you more control. This is especially true if approval rates have dropped or discount fees have increased from your existing third-party lender.
The same is true if your competition offers customer financing and you don’t. The availability of customer financing is an important buying criteria for many consumers, particularly for larger ticket services, and especially in today's economic climate.
Assuming the answer is "yes" for your business, you need a plan for how to extend credit effectively and efficiently. "Getting organized to extend credit," which is our next post in the blog series "Establishing Best Practices for Extending Credit in Today's Economy" will help to get you on the path to success with extending credit to your customers.
Successful businesses in elective healthcare, dental care, and veterinary services use customer financing to maintain and grow their sales. Like accepting different forms of payment, such as credit cards, extending credit is becoming more popular as another method to help close a sale, while enabling customers to financially secure services they would otherwise not be able to afford.
Unfortunately, given the current tighter credit standards and the increase in consumers with FICO scores under 650, access to consumer financing has become significantly limited making the financing that is available more expensive for these businesses. For example, approval rates for traditional financing through credit cards or lending institutions have seen a significant double-digit decline causing many consumers to forego non-essential elective healthcare services and creating a significant revenue decline for elective healthcare providers.
The credit crisis has also impacted many other B2C industries, such as education, legal, home improvement, luxury goods & services, and others that suffer from the lack of effective third party financing.
DIY - extend your own credit
The choice for many businesses is between offering their own payment terms or doing nothing, forgoing the much-needed revenue and crossing their fingers that the economy will improve soon.
As a result, many businesses are now turning to extending credit via internally funded payment plans as a way to close the gap and create a "win-win" for their business and their customers.
Extending credit through payment plans is hardly a new concept. For many types of businesses this is an accepted and well-understood practice that has helped them grow their sales and maintain customer loyalty. And, importantly, steady cash flow.
Many businesses that are considering a program to extend credit through offering their own payment plans have little experience in setting it up. Others, that already offer credit through payment plans struggle with manual processes that are time consuming and error-prone. For both, we recommend establishing credit practices using a "best practices" approach.
Establish a purpose for extending credit
Credit terms enable customers to focus less on prices, enhance customer relations, and have the potential to generate new sales. But before jumping in, the question needs to be asked: "Is it necessary to extend credit to maintain or increase sales?" Answering this question helps to define the purpose for an effective credit program and can establish milestones for measuring the program's success.
Extending credit is an effective way to close the financing gap and give you more control. This is especially true if approval rates have dropped or discount fees have increased from your existing third-party lender.
The same is true if your competition offers customer financing and you don’t. The availability of customer financing is an important buying criteria for many consumers, particularly for larger ticket services, and especially in today's economic climate.
Assuming the answer is "yes" for your business, you need a plan for how to extend credit effectively and efficiently. "Getting organized to extend credit," which is our next post in the blog series "Establishing Best Practices for Extending Credit in Today's Economy" will help to get you on the path to success with extending credit to your customers.
Pet Care Financing During Difficult Times
The credit crisis has severely impacted many industries who rely on customer financing to drive their business and help their customers afford their services.
The Animal and Pet Care Industry is one of the industries impacted by the lack of adequate client financing. Pet insurance and conventional third-party financing are not meeting the need today. ExtendCredit.com is filling this void through it's Pet Care Payment Plan program for Veterinarians and Animal Hospitals.
To learn more, read our press release, or watch our video on YouTube.
The Animal and Pet Care Industry is one of the industries impacted by the lack of adequate client financing. Pet insurance and conventional third-party financing are not meeting the need today. ExtendCredit.com is filling this void through it's Pet Care Payment Plan program for Veterinarians and Animal Hospitals.
To learn more, read our press release, or watch our video on YouTube.