Tips for financing your own accounts
1. Why your company should have credit accounts
Have you considered what happens when you sell your contracts to an outside finance company? The reason outside finance companies want your contracts is the same reason you may want to keep them. They take some risk, do the paperwork and make money! However, you can lose up to half of your profits when you sell your contracts.
Consider the investment you already have in your contracts. You do all the work required to produce the contract, then you give it to a finance company. The finance company will evaluate them and choose only those contracts that meet your requirements and charge you a fee to purchase them. Your only cost is a credit bureau report. If your accounts are good enough for others to buy, they will surely be good enough for you too. The only reason they buy your contracts is because they are profitable. You already have the staff, a desk and a computer. Add some good specialty software, a stationery supply, and you’re in business. One customer told us that it takes an average of 2 hours a day, 6 days a week, or 12 hours a week to work 480 accounts.
Financing is a business that makes money every day of the year. If your business is closed for a weekend or holiday, interest is still earned daily. The interest does not have days off or holidays. Payments can come every day of the month and that gives you cash flow even without making a sale. Here are some other reasons why you want to own finance contracts:
2. Save the discount percentage:
Most financial organizations require a discount to purchase your contract. You would save that amount plus interest and fees as additional profit on the sale.
3. Customer Loyalty:
When customers need your products or services, customer loyalty is much higher when they already have good established credit with you. A customer will come back to you instead of opening another account somewhere else. This is especially true if they’re worried they won’t be able to establish another credit account.
With your monthly statements you communicate with your client 12 times a year. You can place advertising on the statement envelopes and the cost is only time to fill them.
An added bonus is that you are the one calling your customer when they pay late.
You may have a great relationship with your finance company and they may handle your customers the way you want them to, but many retailers find that they lose customers who have been poorly treated by other outside finance companies.
You can develop much better relationships with customers when your own staff request collections because you have a vested interest in them. Outside finance companies don’t always care about their customer relationship.
They usually do very little to help or accommodate their customer. It is highly recommended to know the financial condition of your customers. Because you control the accounts, you know when a customer is late with a payment. That gives an early warning to watch the account very closely.