1. Why Your Company Should Own Credit Accounts
Have you considered what happens when you sell your contracts to an outside financing company? The reason that outside finance companies want your contracts is the same reason you may want to keep them. They take on some risk, do the paperwork and make money! However, you can lose up to half of your profit when you sell your contracts.
Consider the investment that you already have in your contracts. You do all the work required to produce the contract, then you give it away to a finance company. The financing company will screen them and choose only those contracts that meet their requirements and charge you a fee to purchase them. Their only cost is a credit bureau report. If your accounts are good enough for others to buy, they surely are good enough for you too. The only reason that they buy your contracts is because they are profitable. You already have the personnel, a desk and a computer. Add good specialized software, a supply of stationary and you are in the business. One client informed us that it takes an average of 2 hours a day, 6 days a week, or 12 hours a week to work 480 accounts.
Financing is a business that earns money every day of the year. If your business is closed for a weekend or holiday, the interest is still being earned on a daily basis. Interest has no days off or vacations. Payments can come in every day of the month and that gives you cash flow even without making a sale. Here are some other reasons you want to own finance contracts:
2. Save the Discount Percentage:
Most finance organizations require a discount to buy your contract. You would save that amount plus make the interest and fees as additional profit on the sale.
3. Customer Loyalty:
When customers need your products or services, customer loyalty is much greater when they already have good established credit with you. A customer will come back to you rather than open another account somewhere else. This is especially true if they are concerned that they cannot establish another credit account.
With your monthly statements you communicate with your customer 12 times a year. You can place advertising into the statement envelopes and the cost is only time to stuff them.
An added bonus is that you are the one who calls your customer when they pay late.
You may have a great relationship with your finance company, and they may handle your customers just as you wish, but many retailers find that they lose customers that have been poorly treated by other outside financing companies.
You can develop much better customer relationships when your own personnel call for collections because you have a vested interest in them. Outside finance companies do not always care about your customer relationship.
Usually they do very little to help or accommodate your customer. It is very advisable to know the financial condition of your customers. Because you control the accounts you know when a customer is late paying. That gives an early warning to watch the account very closely.