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Sell the Payment when you sell your product or service.

Faye Whiffen27 January 2012

Sell the Payment when you sell your product or service.

By Mike Howard & Faye Whiffin

Effective Credit Management Pty Ltd


Many small to medium businesses believe that in order to make a sale, credit must be given.  This is particularly true of tradespeople and delivery or in-home services. However, with some thought and the effective use of a myriad of financial tools available to achieve immediate payment, to simply offer credit is not necessary.


Today, there are really no excuses for customers not paying for goods or services when they receive them, as in-store and mobile eftpos machines are readily available and widely used.  A business that deals with a large number of (mainly) consumer style customers and does not have one of these essential items is, quite frankly, behind the times.  It is also relatively easy to take credit card payments over the phone prior to any goods or services being given.


The main obstacle to the use of these payment tools by many small business operators, is not how their customer thinks but how they themselves approach the matter.


When Mrs Jones calls for the plumber to come out and repair the blocked drain, whoever takes the call could say something like “Yes Mrs Jones we can be there on Tuesday at 10am, will that be convenient?  By the way, our minimum charge will be $xxxx plus any parts and additional labour.  How would you like to pay, will you have a credit card ready on site or would you prefer to pay in cash?”


At this point Mrs Jones has the option to query the price or ask for an estimate or a maximum price if possible and does not have any excuse for querying the bill later.  It also puts Mrs Jones on notice that payment is expected at the time that the service is performed.  If Mrs Jones asks for an invoice to be sent to her and pay later she is actually asking for credit to be extended and this should be discouraged.  If a customer cannot pay on the spot for a service performed, in particular in the domestic environment, the chances that they will not pay later (without dispute) become higher.  If the supplier elects to give Mrs Jones credit then the supplier should respond to Mrs Jones along the lines of “We will be happy to issue you with an invoice Mrs Jones if you complete our application for credit and that application is approved.  As this process can take a little longer that the cash option we will have to postpone our visit to you until Thursday”.


Consumer credit is an area which should be avoided by all but the experts such as banks and finance companies.  It is not a space that small business operators engage in.  Even extending credit to other businesses (B2B) should be avoided unless the credit application is completed and credit checks are completed and approved.


By adopting the “pay at the time goods or services are given” approach the business will see an immediate increase in cash flow and a significant decrease in administration time taken to send invoices and then follow up for payment.  Bad Debts and subsequent write offs will also decrease significantly.  It is all in the way that the small business operator looks at his/her money.  If a customer goes into Woolworths to buy groceries they expect to pay for them at the checkout.  Woolworths money is no more valuable than any other business’s  money.  If a business respects its own money then the customer will too.


For further information please contact Mike Howard or Faye Whiffin. 

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