No matter how much time is spent doing credit checks and staying on top of accounts receivable, most businesses in our industry still have past due accounts that, in truth, should be written off to bad debts.
Have you ever asked yourself why you are still in the business of loaning money to your customers by way of credit terms? Isn’t that why God invented credit cards?
The acceptance of credit cards in business to business transactions is becoming so commonplace that I’m beginning to wonder why they still teach Receivables Accounting in all those accounting courses that are given at colleges and universities around the world!
There are many benefits to the seller and the buyer when using credit cards to pay for business to business transactions. They include:
- Sellers collect the amounts due for the product or service that they are providing at the exact same moment that they issue the invoice to their customer.
- Just as important, the customer still has credit terms by which to pay for his purchase without incurring finance charges.
- And, in many cases, the customer earns “Rewards Points” that they can use for other purchases. It’s a win/win
I understand that there are credit card processing fees associated with accepting credit card payments. However, the fees are almost certainly lower than the costs incurred managing the credit and collection processes not to mention those bad debts!
If you are still extending credit terms to your customers rather than accepting credit card payments you may want to revisit that decision.