Selling on credit helps to build up a clientele of regular cus tomers. Cash customers are anybody’s customers. Charge cus tomers are customers of record. Other important points are:

Charge customers usually are not as concerned with the prices of goods as are those who pay cash. They tend to buy a higher quality of merchandise, and they frequently buy more of it.

Credit is an accommodation to customers so that they generally have a feeling of good will toward the store. A more intimate relationship can be built up between the cus tomers and the store.

Goods can be sent on approval to customers.

Charge customers provide an excellent mailing and promotion list.

Adjustments can be made more easily.

Along with these advantages come disadvantages, which you must also consider:

Capital is tied up in merchandise charged by customers.

No matter how efficient the merchant’s collection system, some losses are bound to occur. Credit customers may pur chase beyond their ability to pay.

Credit customers have a greater tendency to return goods than cash customers. Credit adds to the cost of operations, since an account must be maintained and monthly statements prepared and mailed. Small Business Solution - Read More.