Extending Trade credit to customers in South Africa
Our team at i-Check Data Solutions have put this article together to help explain how best to extend trade credit to customers in South Africa.
What is trade credit?
For many businesses, trade credit is an essential tool for financing growth. Trade credit is the credit extended to you by suppliers who let you buy now and pay later. Any time you take delivery of materials, equipment or other valuables without paying cash on the spot, you’re using trade credit.
How to use trade credit
When you’re first starting your business, however, suppliers are most likely not going to offer you trade credit. They are going to want to make every order COD (cash or cheque on delivery) or paid by credit card in advance until you have established that you can pay your bills on time.
How to extend credit to customers
Before agreeing to provide any services or goods on credit to your clients, check out the credit rating of the company. The commercial credit report will highlight trends in your prospect’s payment history. Its important to realize that just in the same way you build up a credit history that a bank or credit provider will use to determine you ability to repay a loan or credit, so too does your company build its own credit score. The better you are at paying your bill as a going concern, the stronger your score and your risk of taking credit drops.
This information will assist you in determining the payment terms that equal the risk the client presents. i-Check Data Solutions can help your firm to vet all new suppliers and determine whether they are high or low risk prospects for credit. Our reports are powerful and affordable, with a comprehensive commercial credit report costing R 99 ex vat, can you really afford not to do your homework and background check all clients before extending credit. Our system is simple to use and you will have the results instantly.
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