Risk Management Plan Tips
- Increase business sales by attracting more customers. Extending credit will surely encourage customers to buy your product or services and start a partnership with your business. It represents a safer environment for the customer to be dealing with a company providing payment facilities.
- Competitiveness. Extending credit is a big plus compared to competitors who are not providing credit facilities. This can be used as a selling point during difficult times.
- Reputation: Offering credit facilities means that your company is stable enough to be providing such a service which is especially important during the COVID-19 crisis.
- Risk of late payments or frozen payments. Extending credit could lead to late payments or no payment at all from customers especially when many businesses are currently suffering from the economic downturn.
- Need of additional resources (human resources, money, time) for account receivables. Such as assessing receivables portfolio, renegotiations, and partnering with outsourced collection agencies.
- Affects the company’s cash flow. When a company agrees to extend credit, it could itself suffer from a shortage in cash and will not be able to settle payrolls, new inventories marketing, and other business operating expenses.