Why Do Companies Sell on Credit?

The ideal situation for any business is to sell their product or service and receive payment on or before delivery.  No payment, no delivery.  Simple.  In reality however when in competition with similar operating businesses this is only feasible when every supplier does it and that in itself is not reality.

Yet it is not sufficient to provide credit to your customers simply “because everyone else gives credit”.  A company needs to evaluate what it must achieve from its credit sales – i.e. Increased Sales;  Improved Profitability;  New Customers;  Increased Market Share.

Remember, a business wants customers to come to it for the product first and then for its credit terms, not the other way round, though unfortunately it very often is that way.