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Home Contact Micro Factoring Debt Collection The Cost of CreditHow much does it cost your business to give credit to your customers ?1. Cost of the money:Dont fall into the trap of thinking that the only cost of providing credit is the cost of the money. The cost of the money currently is likely to be anything from 6 to 22% per annum or even more in some cases, depending upon what sort of financing arrangement your business has. This of course is a significant cost .. but its just the start.2. Other Finance Charges:You will likely also incur other bank charges, application fees, honour fees, etc, if you are on the edge of your facilities.3. Administration Costs:If you are providing credit, you then have to administer your credit control system. Administration of your credit application/assessment process; invoices and statements to send out; credit control phone calls. both of which are significant costs. You either have to pay someone else to do this, or spend your valuable time doing it yourself, (Note: Cutting back in this area, simply increases costs in areas 1,2 4 and 5 on this page).4. Bad Debts:Bad debts are expensive. The cost of doing the job, materials, wages and, of course, time cost can never be recovered if the account is never paid.5. Opportunity Costs:What would you do with the money and other resources - such as increased time - which you would have if you were not waiting to be paid ? Could you take on another worker if you had steady cash flow ? Spend more on advertising ? Spend time on something else ?Home Contact Micro Factoring Debt Collection |