Is it good or bad to give credit?
Being an entrepreneur today means facing and overcoming a series of barriers that in many cases represent real challenges.
Inflation, exchange controls, price controls, scarcity of resources that force to restrict, even to stop the production of a company, are just some of the obstacles or barriers that must be overcome if you want to be a successful entrepreneur in many Latin American countries.
Companies, aware of this reality and as a survival strategy, have adapted and, in order to reach a larger market and increase their sales volume, have adopted credit sales as a business model.
Credit is one of the problems that small and medium-sized entrepreneurs have traditionally raised as a priority for their growth, highlighting the difficulty of obtaining financing to pay for working capital, market studies, personnel training, obtaining foreign currency, new legal and commercial regulations, among others.
In markets as volatile as those in which the different traders that make up small and medium-sized companies operate, it is necessary to have capital to leverage the sector's operations, expand their activities and, in general, create competitive advantages that will allow them to grow and formalize their business within the sector.
Small entrepreneurs face financial obstacles, some of which are: access to credit, high cost of credit when it is available, lack of financial instruments tailored to these entrepreneurs, the time it takes to receive financing, and limitations of the financial system.
Today, credit is undoubtedly an alternative for entrepreneurs and customers.
It has been proven that selling on credit increases sales and from the customer's point of view, buying on credit gives us the opportunity to acquire goods or services that we considered unattainable, and pay for them little by little. But in order to sell on credit we must know the pros and cons.
While it is true that granting credit increases your sales volume, you must also have a limit so that your profits and capital do not end up in the hands of others, in other words you must allocate a percentage of your sales for this.
You must also create a department for collections and payment control or your accounting will be a disaster, so you must create an extra one for these cases.
Credit will give you a competitive edge over those who don't and makes customers who take credit have a closer relationship with your business.