What Is Credit Control

Credit control is a strategy used by businesses to extend credit to potential customers to increase the sale of products and services. Credit control is a strategy used by businesses to extend credit to potential customers to increase the sale of products and services. The goal is to work with as many creditworthy consumers as possible and limit how frequently credit is offered to consumers with poor credit. 

 Definition and Example of Credit Control

Credit control is a standard businesses use to determine how much credit to offer their customers. While getting paid upfront is the easiest and safest way for most companies, it can also limit the total profits. Extending credit can make it easier for potential customers to purchase your products and services. By breaking up the payments into monthly installments or letting customers pay later, it can make the purchase more manageable. Alternate name: Credit policy For example, a company may offer in-house financing in which they allow customers with high credit scores to pay off a purchase over a set period of time. In theory, the financing encourages customers to make purchases, thereby boosting the company’s sales.

How Credit Control Works 

The success or failure of your business largely depends on the sale of your products and services. Sales are a clear metric for business success: the higher your sales, the higher your profits will be. Before you extend credit to your customers, you need to have a credit policy in place. Credit control determines who your business extends credit to. Extending credit to customers with a poor credit history or delinquencies can ultimately hurt your business more than it helps. A credit control policy can play out in a variety of different ways, depending on the type of business you run. For instance, professional services businesses may offer credit terms to individuals and companies. After the service is provided, they’ll typically send an invoice with payment terms depending on the service agreement. An e-commerce business, on the other hand, may set up a monthly installment plan to pay for the purchase of products. These types of companies will usually accept credit cards and other online payments.

 Types of Credit Control 

Two common types of credit control are restrictive and liberal. The policy your company implements will largely depend on its size, profit margins, and total market share. 

Restrictive Credit Control A restrictive credit control policy poses the lowest level of risk to your company. It means that  you’re only willing to work with customers that have a strong credit history. This is a good option for companies with low profit margins or where there are many risks involved. Liberal Credit Control A liberal credit control policy means the business is willing to extend credit to most customers. Companies that have high profit margins or operate in a monopoly may prefer a liberal credit policy.

Types of Credit Options

 If you choose to extend credit to your customers, you’ll need to decide which types of credit you’re going to accept. Here are a few of the most common types of credit options you may choose to offer. Credit Cards Companies that choose to accept credit cards will have to decide which payment options they’re willing to accept. For example, a merchant may not accept credit cards from a certain issuer but accepts cards from other issuers. Companies will pay an interchange fee for every card transaction, starting as low as 1.15% plus a few cents for Visa and Mastercard transactions. However, accepting credit cards comes at a very low risk to businesses because the risk falls on the credit-card issuers and not the individual customer.

Checks Some companies still accept checks from customers, though this can be risky. There is always a chance the check will bounce. If you choose to allow this option, you need to have a policy to obtain customers' identification. 

Credit Terms Finally, some businesses will extend credit terms to their customers. If you do this, you’ll need to have your customers sign a sales contract that outlines the payment terms. Before the terms are binding, the agreement must be in writing and signed by the customer.

How to Grow Your Online Business With Amazon

Maintaining an online business requires wearing a variety of hats at all times, from inventory and marketing to shipments and customer service. To simplify daily tasks, however, business owners can leverage the systems that other platforms have already put in place. One of the best sites for small and midsize businesses to use is Amazon. In 2019, there were millions of active users on Amazon, including 105 million Amazon Prime customers, many of whom shop on the site daily.1 According to a 2016 study, more than 50% of online shoppers go to Amazon first when looking for a product they want to buy.2 Using Amazon to start your e-commerce business provides a platform for marketing, connecting with customers, selling, billing, and even shipping your products. This can help you start your venture with fewer resources, grow your business more quickly, and learn valuable lessons about selling online in the process.

Why Use Amazon to Grow Your Business 

There are millions of third-party sellers on Amazon combined, they sell more than 50% of the products sold through the site.3 In 2018, small and midsize businesses in the United States made an average of over $90,000 in Amazon sales.4 This is made possible by a variety of benefits that any business can take advantage of by using Amazon as an e-commerce platform. 

It has a built in customer base: Millions of people around the world go to Amazon every day and buy thousands of products. That’s qualified traffic you can’t get with your own website, especially not in your start-up phase. That reach can help you make a profit from your early stages, rather than spending most of your time and resources trying to attract customers.

It’s a brand name: Customers are more likely to trust businesses whose names they recognize. Because it has been around so long and been so successful, Amazon is a trusted site. As a new business, you would have to work hard to earn that sort of trust. But when you sell on Amazon's preexisting platform, you can leverage their credibility with customers from day one. 

The technical work is already done: One of the major tasks that online sellers face is setting up an e commerce platform and shopping cart where your prospect can easily browse and order your products. When you work through Amazon, this has already been done, and the job of maintaining it and handling tech support is also covered by Amazon. This allows you to focus your time, energy, and other resources elsewhere. Amazon has two levels that sellers can choose from. Individual sellers can list products in more than 20 categories and pay a fee of $0.99 per sale. Professional sellers can list in an additional 10 categories, pay a flat fee of $39.99 monthly, and have additional customization options for their listings and shipping. Both types of sellers pay additional fees when products sell.

How to Use Fulfillment by Amazon to Grow Your Business 

If you’re selling on Amazon, you can sell your products through the website, then process orders and ship them to customers yourself. If you don't want to handle processing and shipping, which can tie up valuable time and resources, you can also let Amazon handle payments and processing orders, which is known as FBA.

Using FBA is a standardized and fairly simple process: 

• You send a number of your products to Amazon. 
• Every time an order comes in, Amazon will handle the necessary steps to get the shipment to your customers.
• Amazon takes a portion of each sale as a fee.
• The net income from each sale is deposited in your bank account on a regular basis. 
• Amazon handles any returns or exchanges.

Because Amazon has streamlined systems and sufficient manpower to handle order fulfillment and returns, they can do these tasks more efficiently and at a lower cost-per-order than many small businesses. The fees you pay for each FBA sale are generally lower than you would pay to store and ship a comparable number of products yourself.