Granting Credit on Open Account
Q: I have a customer asking for credit on open account. What factors should I consider in deciding whether to grant the request?
A: Your customer is asking you to extend credit and assume all the risk of non-payment. This is often a dicey proposition and should be considered only after carefully verifying the customer's credit references, past credit history, cash flow, and possible collateral. If you do decide to extend open account credit, you should have a credit agreement that spells out the specifics of the transaction and that will protect you as much as possible in the event of a default. Consider that small sales of high margin products may justify much less scrutiny than large sales of low margin goods or services. Consult with a professional schooled in the credit granting process to make sure that you cover all your bases.
