Run the numbers before you extend customer credit

Funny thing about customers: They can keep you in business, but can also put you out of it. The latter circumstance may occur if you overrely on a few customers that abuse their credit. To prevent this, keep your credit application form comprehensive and updated. When working with private companies, request financial statements and look at metrics such as profit margin (net income divided by net sales). From the balance sheet, calculate current ratio (current assets divided by current liabilities). For more help assessing customers’ creditworthiness, contact us.