A decision faced by most value-added businesses is whether to extend credit to the purchasers of your product/service.  Although sales can be stimulated by extending credit to purchasers, it also requires you to have more working capital to finance the credit sales. More important, collection problems can result in additional costs associated with collecting accounts that are over due and writing-off uncollectible accounts.

For more information on this topic, see the links listed below of articles posted on related Web sites.

Extending Credit

• Plain English Guide to Extending Credit – Business.gov -- The Guide's recommendations on how to properly extend credit.
• Selling on Credit – Small Business Notes -- Selling on credit means offering credit directly to your customers, not simply allowing them to use credit cards.
• Accepting Cash and Checks – Business.gov -- Should your business accept personal checks or debit cards?
• Information Compromise and the Risk of Identity Theft: Guidance for your Business – Federal Trade Commission -- These days, it is almost impossible to be in business and not collect or hold personally identifying information about your customers, employees, business partners, students or patients. If this information falls into the wrong hands, it could put these individuals at risk for identity theft.
• Credit and Collections – The U.S. Chamber of Commerce -- Discusses the pros and cons of accepting credit cards or offering trade credit, and tells you how you can more quickly and effectively collect the money your customers owe you.
• Consumer Credit Laws – NOLO Law for All -- If your business extends credit to its customers, you'll need to comply with federal consumer credit laws.
• Checking a Customer’s Credit – AllBusiness.com -- When you extend credit, you are in effect loaning customers your own money.

Collections

• Plain English Guide to Collecting Debt – Business.gov -- The Guide's recommendations on how to collect debts from customers.
• Creditor’s Legal Rights – Lawyers.com -- Collecting business debts can be difficult enough without worrying about whether you’ve stepped over the line in going about the collection.     
• Collecting Business Debts – Lawyers.com -- Getting slow-paying customers to cough up what they owe is frustrating and a big drain on cash flow. But there are ways to nudge a customer into paying.
• Collection Scenarios – CCH Business Owners Toolkit -- Here are a series of scenarios illustrating how a collection process might be organized.
• Articles on Collections – All Business Resources.
• Credit and Collections – Entrepreneur.com – Series of articles.
• Collecting Accounts Receivable – Small Business Notes -- The longer an account goes unpaid, the more difficult it becomes to collect.