Extending credit to customers during a recession is tricky. Continuing to give customer credit will give you a competitive advantage and hope grow your sales, but you must be careful.
My 96-year old father is a WWII navy veteran. He describes the scariest moment in his life as the time his ship was tossed in a typhoon at sea. In the South Pacific, typhoons are sudden, fierce and dangerous. Sailors are taught that if they are caught in a storm and have no other choice, they must employ “steering way”, meaning they must ride straight through but with enough power to keep from being tossed by the waves. The idea is to keep a strong and steady pace into the wind, and avoid being broadsided.
Granting customer credit is exactly like riding out a storm at sea. If you are going to do it, you have to plan for it. Are you prepared to continue extending customer credit in a recession?
First, know how your customers pay. Not all customers deserve credit but many will. Some of your best paying customers might find many of their credit lines constricted. If a customer has a good payment history with you, take a leap of faith with them and continue to extend credit. For customers that pay a little more slowly, consider a payment plan with an upfront deposit.
Of course, as you navigate your way through customer credit in a tough economy, you must continuously monitor the situation. Stay on top of your receivables. If a customer goes past due, get on top of the situation immediately. Reach out to the customer and see what is going on.
Tough times make communications with your customers even more important.
Have a plan, stay safe, stay the course and full speed ahead!