Wouldn’t it be great if customers always adhered to your credit terms?
When the credit manager’s performance is periodically evaluated, the inevitable question arises: How close is your actual DSO to your stated credit terms? Do the customers adhere to our terms or do they tend to follow their own preferences?
CRF performed a study to examine differences in when providers of products or services (creditors) consider their credit terms to become effective; and relate this to different customer payment habits. The results indicate that the time at which terms become effective does affect customer payment behavior, along with providing a number of other observations about the interaction between customers and suppliers.
Credit Terms drive all commercial transactions. As an essential ingredient in almost all commercial transactions and government financing, well-managed credit is a vital asset to American business. It facilitates the movement of goods from seller to buyer and offers a strong force to our ever-growing business activities.
Without the bridge of credit, there would be a serious gap between production and consumption. Because our credit system is flexible and strong, the American economy can operate at a high level of efficiency, with maximum production and profitable distribution.
Suppliers help finance customers by providing goods or services on credit. To get a clearer picture of the role that credit terms play on customer payment behavior, CRF conducted a brief survey among it’s members to derive a degree of dichotomy between sellers terms and buyers payment habits.