Creditors' Rights 38
Q: I’ve used the Get P.A.I.D.® System and have decided to grant credit to a new customer. What are some exceptions with regard to credit limits and discounts that I can offer?
A: Two 10 percent rules exist. One states that the upper limit on credit should be no higher than 10 percent of the customer’s net worth. The other rule tempers the first: no one customer should account for more than 10 percent of the credit-granting company’s annual business. Keep in mind that new businesses can easily obtain $50,000 credit limits from some credit card issuers.
Discounts, though, rarely exceed three percent, but they are an excellent means of encouraging prompt payment from honest, conscientious debtors. Be advised that some savvy customers may try negotiating the discount by having it begin at the end of the month, not upon receipt of merchandise.
Typically, “payment terms” refer to when and how the invoice is to be paid. Usually there are two time periods. One is attached to the discount and is usually between 10 and 15 days. If the bill is paid within that period, the customer is permitted to take a discount, often two percent. If the discount period is ignored, the other time period applies and the full amount of the invoice is due, typically in 30 days.
*Learn more about credit policies and the Payment Gap with Bob Bernstein’s new book, Get P.A.I.D.TM A Guide to Getting Paid Faster (and What to Do if You Don’t!) at www.getpaidsystem.com
