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Credit Control
2. Setting Credit Limits
As a start-up, you may not be able to afford the luxury of only dealing with blue-chip customers. You have to decide how much you are prepared to risk.
2.1 Set an upper credit limit for any customer - an amount you are prepared to risk.
- A customer's credit limit should be based on references and your own checking.
2.2 If anyone exceeds your limit, review the situation carefully. It may indicate problems.
2.3 Set a minimum order size for credit accounts.
2.4 Do not let greed overrule your judgement.
- If a customer wants to buy more than the credit limit allows, get cash for the extra. Otherwise, what seemed like a bumper sale may turn into a bumper bad debt.
