Finance How to ascertain credit worthiness of your customers

[Augusta]

No man is an island as such we depend on people for growth. If you owned a business you would be confronted with people wanting to buy on credit, which by the way it's a good way of making more sales.

But the issue is always the need to ascertain that such customers are credit worthy. Well, there are the 5 C's that you can use to ascertain this. These 5Cs are :

Capacity. You need to assess the abilities of the customer to pay your debt

Character: Assess the character of the person involved. How has the previous transactions with him or her been

Capital: Assess the customer books of accounts to know how much you can give out

Collateral: What's the collateral presented and does it worth your goods


Conditions; the condition the customer in should help you know how credit worthy the person will be.

What do you think?

 

[Mandy96]

This is very important, I mean you can’t just be giving out credits to all of your customers, doing this might or will eventually ruin your investment. You have to set some certain standards for the credit worthiness part. First of all, you have to be able to consider old customers with good payment history, I mean they would have been doing business with you for at least the minimum of two years and they must have never bought from you on credit, so if such client are asking you to give them some goods on credit, I think they should be able to be considered with some down payment though.

 

[Augusta]

This is very important, I mean you can’t just be giving out credits to all of your customers, doing this might or will eventually ruin your investment. You have to set some certain standards for the credit worthiness part. First of all, you have to be able to consider old customers with good payment history, I mean they would have been doing business with you for at least the minimum of two years and they must have never bought from you on credit, so if such client are asking you to give them some goods on credit, I think they should be able to be considered with some down payment though.

You got that right the truth is that a lot of people with diverse character will always want to buy from you on credit, you just have to protect your business or else you would allow them wreck it for you. Filter the people you give your goods to, to avoid bad situation

 

[Yusra3]

To evaluate customers' creditworthiness, start by obtaining credit reports and scores from major bureaus. Analyze payment histories, debt levels, and public records for red flags. Request bank and trade references to gauge their reputation for timely payments. Have potential customers complete a credit application detailing financials, time in business, and banking relationships. Implement a process for routine credit monitoring and set clear credit limits aligned with your risk tolerance. Proactively assessing creditworthiness protects your business from delayed or defaulted payments.