Should You Offer Easy-Payment Plans to Your Customers?

2/18/2015

On two different occasions, I attempted to try and offer a Graphico Credit Account to my customers. I designed a credit application, gathered information on the person's credit history and employment history and opened an account for them with a 10% APR interest rate.

And even though their credit and other information on their application checked out fine -- the idea turned out to be a failure. Why? Because in order to offer credit or easy payment plans to your customers, you must have the money to afford it.

For instance -- suppose someone ordered a print and mail from me for $100 and charged it on their credit card. Since they didn't pay any money, it was me who had to take money from my own pocket to pay for the printing and mailing expense while waiting 4 or 5 months for the money to be reimbursed to me. While I could financially do this for a few people -- I certainly was unable to do this for 25, 50 or 100 people.

And there were many times when the customer did not pay their bills on time. I had to send two or three reminder notices just to get the minimum payment they owed. This procedure cost money for postage and time. The accounting to maintain these accounts cost me more than they were worth -- so I abandoned the idea.

The Good Part

But believe it or not, there is really a way that you can offer easy payment or credit privileges to your customers. Just don't advertise it. Instead, pick the top customers you have that order from you quite often and always pay their bills on time. Then, if you can financially afford to absorb the cost -- offer them credit privileges because of their past history and customer patronage. The customer will feel honored that you have selected them for this honor and will trust that you really and sincerely appreciate them. More than likely, they will order more products and services than they previously did -- simply because they can now say "charge it" and are a part of only a select few.

The best business in order to establish customer credit card privileges is a service business. If you are a typesetter, writer of reports and books or a publisher -- your overhead costs are minimal and you can absorb the cost of the product. For instance: a typesetter only has an out-of-pocket expense for the paper and postage to process the order. Their time is valuable, but the typesetter doesn't have to pay out cash for it. Because of this situation, a typesetter can establish customer accounts and wait on payments.

The Advantage of Payment Plans

The good thing about offering payment plans and credit options to your good customers is that you can even out your weekly income. In mail order and small business operations, you can experience one good week and one bad week. Often times, you never know exactly how much money you will bring in. When I started my business, I had an $1,800 week and automatically assumed that my income would grow from there. Unfortunately, I never saw another $1,800 week for another three years.

Incomes that fluctuate from one extreme to the next every month make it very hard to plan business expenditures and prohibit growth. If you know you have ten customers sending a minimum payment on their account of at least $20 this month -- you can relatively bank on a $200 income this month. But not knowing day to day what income you will receive is a phase all of us live through and all of us must find ways to even out our particular flow.

Business is a continual learning experience. What works for one person may not always work for another. It's important to gather a wide variety of ideas and mix them for your own workable combination. My best to you.

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