Extending Credit to Customers

By Nina Kaufman, Esq.

More naches and brag–this time on the issue of extending credit to customers. See Melanie Lindner’s piece in Forbes.com on “How Much Credit do Customers Deserve?” She and I talked about the changing economic climate (euphemism) and whether it made sense for businesses to extend credit to customers.

Whenever you extend credit (which occurs any time you don’t get paid at or before the time you provide your product or service), you take a risk of not getting paid . . .  at all. It doesn’t take a Harvard MBA to understand the negative impact that has on your cash flow.

One way to lessen the blow is to charge interest or late fees on outstanding balances. However, you can’t do this without letting your clients or customers know in advance–and courts won’t grant you interest (or late fees) unless they’re part of your written contract. So make sure you have this provision in your agreements . . .  and create a system for collecting debts so they don’t fester. The longer it’s outstanding, the less likely you are to collect the money that’s rightfully yours.

Want to learn more about Kaufman Business Law? This is the video to watch.