Implications
- Great initiative in that small/medium suppliers can benefit from the credit rating of larger customers
- But they still have to finance the credit, albeit perhaps not at penal interest rates
- The real issue is retailers taking 45 days+ to pay for goods that are often daily-delivered, with shoppers paying in cash…
- See Cost of credit calculation on Kamcity
- Work out the actual cost of giving credit to the customer
- Calculate the incremental sales required to cover cost of free credit i.e. say your net margin is 5%, then every £1,000 it costs to give free credit means you need incremental sales of £20,000 to cover the cost
- Substitute your figures in the above calculation and book an appointment with the buyer...
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