Top four reasons to avoid credit sales in your business

[Augusta]

When it comes to wanting a business that is solid and stand the test of time it is better not to go the route of selling on credit. you might think that's selling on credit will attract more customer yes it might but in the long run you might be ruining the business.

The following reasons should stop you from making credit sales

1. you will be tying down your capital

When you sell on credit you are not only giving out your profit you are also giving out your capital and this means that buying new products might be almost impossible at times

2. running the business on a loss

You might be running the business down because credit sales means that the business have a high debtors

3. lack of money to run the business

Credit sales and money in the hands of buyers might not give you money to run the business effectively

4. Collapse of the business
This will happen sooner than you think because when the business begins to experience bad debt the death of the business will be imminent

 

[Jasz]

Credit sales are a great way to get new customers, but they're also a great way to create bad credit.

Here are four reasons you should avoid credit sales in your business:

They cost more than other forms of advertising. If you can't pay for it yourself, then you'll have to pay the bank or credit card company instead. That means you'll have less money left over to invest in the other parts of your business.

You'll have bad debt on your books. If you buy something with a credit card and then fail to pay off that balance at the end of the month, then your credit report shows a charge for "credit sales." The effect on your score is negligible but not insignificant — about half a point lower than if it were unpaid invoice debt — so keep this in mind before making any purchases with your credit card!

Your numbers will look worse than they need to be. Even if all that bad debt disappears when it's paid off (or paid off in full), if it's still showing on your credit report, then lenders are going to see it and think twice about lending more money to you down the line. They might even consider pulling their business from your site entirely if they perceive high risk.

 

[Yakub02]

Credit sales is one of killer of business especially when the business is still an infant. Selling with a view to getting money at a future date definitely has reduced the value of the money used for the investment. This is due to the inflation rate on the fund.
The expected may eventually go bad as some customers may die, relocate or suffer a great loss in their business life.

 

[IB D]

Truth is you can't even do without giving credits at a certain level in your business. That's where what we call calculated credit comes in. You would have to weigh the level the credit you are giving is going to affect your business. If it is minimal, you risk it and see.