How Can Entrepreneurs Avoid Overextension of Credit?
There are several strategies that entrepreneurs can employ to avoid overextending credit:
- Credit Policies: Develop and enforce clear credit policies that outline the terms and conditions under which credit will be extended. - Credit Checks: Perform thorough credit checks on potential customers to assess their ability to pay. - Limit Exposure: Set credit limits to control the amount of credit extended to any single customer. - Monitor Receivables: Regularly review accounts receivable to identify any potential issues early and take corrective action. - Diversify Customer Base: Avoid relying too heavily on a few customers for the majority of your sales, as this can increase the risk of significant bad debt.