Business TargetsDebtors are the assets of a business. They represent the cash-generating capacity of an organization. Thus, a high volume of debtors define your business’s prosperity. However, such prosperity comes with a risk of non-payment, bad-debts and losses. Hence, you will always find financial advisers suggesting you to keep your credit period least in order to minimize risks of bad debts. This might be a safe option; however, it might not be instrumental in your business’s growth as a longer credit period definitely attracts more customers. So, how do you balance between the risk and benefits of long credit periods?

The answer is simple – You strategize your credit policy as per your business’s environment. If an opportunity or need for longer credit period arises, you should employ it immediately.

Following are the situations where a longer credit period will benefit your business:

1. New Business Targets
If your business has planned on achieving a new business target this financial year, a need to attract new customers will definitely arise. In such situations, offering a higher credit period as per market conditions will constitute a good strategy.
However, one must not issue credit carelessly to everyone. Certain boundaries need to be kept in mind in order to avoid risks of bad debts. Certain terms must be laid to ensure prompt payment on time.

2. To Get Rid of Your Slow-moving Stock
Certain stock might be staying on your shelves for a long time. Such goods are at a great risk of getting damaged or becoming useless. In such cases, offering a credit period for slow-moving goods will help you attract more customers. This is a far better option than bearing losses of unsold stock. This will also help you in creating more space for new stock.

3. Introduction of a New Brand
Once a new brand with better technology starts dominating the market, you have no option other than getting rid of your obsolete product in order to take advantage of this new brand’s popularity. In such cases, offering longer credit periods for obsolete products might help you sell them faster. Then, you can concentrate on making profits from the latest trending product in the market.

4. Rise of a Competitor
A competitor might suddenly rise to threaten your position in the market. In such situations, offering longer credit periods might help you retain your existing customers. If things go well, you might be able to attract new customers as well.

To conclude, always try to take out the best from your business surroundings. If an opportunity arises, make full use of it by employing relevant policies discussed above. If you need further assistance in deciding a suitable credit policy for your business, visit