Bending Your Credit Policy to Gain a Customer

At one time or another, nearly every business owner has come across this issue: should you modify your company’s credit policy in order to gain – or retain – a customer? Let’s take a look at several pros and cons and then a few examples of when bending your credit policy is worth the risk.

Perhaps there’s pressure from your sales director who knows a prospect’s credit isn’t great, but believes closing the sale will be good for the company. Or, there’s a directive to make the quarterly goal regardless of the outcome. Whether either of these scenarios exist or not, it goes without saying that a lack of customers or an overabundance of bad customers ultimately results in a business failing. When running a company, however, it’s necessary for you to consider the potential risks and benefits of bending your business’ credit policy.

CONS

  • Loss vs. gain. Yes, taking on a new customer can help you further develop your business, but what if it doesn’t? Company growth is always a top priority. However, you have to consider what kind of customer will actually help you achieve this. Making an exception in bending your credit policy to acquire a new customer shouldn’t be a decision you take lightly. When running an organization, it’s important you carefully weigh the potential benefits and consequences of such a decision, ensuring you’re at least better prepared for the end result.
  • Establishing a poor precedent. Making exceptions to your rules or policies is often followed by those hoping to take advantage of your generosity. Sure, it’s always great to receive referrals, but if they’re coming from the wrong people, you could have a difficult situation on your hands. It’s up to you to decide whether it’s worth it to bend your credit policy to help out a new customer and risk establishing a precedent that could be detrimental to your business in the long run.
  • Creating company debt. If you were to risk your financial stability to build customer rapport, keep in mind that credit can make or break any business. If you bend your policy for even one client, it could turn your finances into an unfortunate mess. Make sure you properly assess the situation before making any set decisions and plan accordingly.

Pros

  • Company growth. When it comes to growing your company, changing your policies could work in your favor in a number of ways. For example, in addition to becoming a long-term customer, the customer could be a great referral source for new business. Who better to refer your company than a satisfied customer?
  • Beating your competition. It could be valid for you to bend your policies to beat out your competition. However, weigh your options and make an informed decision.
  • Increased client satisfaction. Showing you are willing to work with customers who may be struggling a bit can set you apart from other organizations in your field. Today’s world is often so fast-paced and cutthroat that it’s refreshing to let your current and potential customers know you think of them as actual human beings rather than just another account number. Building client satisfaction will always be beneficial in the long run.

Real-Life Examples: When You Want to Bend Your Policies

Now that you’ve considered the pros and cons - and no doubt come up with others applicable to your industry or niche - here are some examples we’ve seen from our customers who took a risk and gambled on the outcome:

  • The prospective customer had an annual sales review that is double your average customer.
  • A high-profile celebrity lent her name to a sock manufacturer to create buzz and increase sales.
  • A prospect with a niche in auto parts and service is committing to 2x more volume of business per month than your average customer.
  • A healthcare startup was formed by several executives from other successful healthcare companies. The execs had the experience and knowledge, but didn’t have the track record, yet, to demonstrate stability.
  • A manufacturer is asking for extended terms but is willing to set up an auto pay on the due date for all outstanding invoices.

Look at the matter from all sides. Remember, you don’t know what you don’t know. Bending your policies for a prospective customer could build the credibility of your business and could be used as a case study or example to drive more business. Don’t immediately discount a potential customer just because they don’t perfectly fit within your policy’s boundaries. In the end, your business can’t grow if you’re not willing to make a few risky decisions.

Here’s a tip: If you’re on the fence about adjusting your credit policies, run your prospect’s credit history to get a better read on the situation, or set up a consultation to speak further with them in person. Though it could be a toss up, taking this leap of faith could result in financial growth for your company.

Whatever you decide, you will walk away from your decision with increased experience and knowledge on how to better handle similar situations in the future.

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