With the prevalence of online shopping, many businesses are looking for ways to make their products more accessible to potential customers. One way to do this is by offering in-house client financing. This financing allows businesses to provide their products or services on a payment plan, making it easier for customers to afford.
Every business owner wants to increase sales and bring in more revenue. But sometimes, the upfront cost of a product or service can be a barrier for potential customers. This is where in-house client financing can come in handy. In-house client financing can be a great way to increase sales and attract new customers. However, a few things to remember before offering this type of financing. In this article, we will discuss how to offer in-house client financing. Let’s dive in more.
Educate Your Clients On In-House Client Financing
Before considering offering in-house client financing, you must ensure that your clients are properly educated on the topic. After all, they’ll be taking out the loan, so they must understand all the ins and outs.
When you’re educating your clients, make sure that your clients understand what the interest rate will be. This is perhaps the most important part of in-house client financing, as it will have a direct impact on their monthly payments.
Your clients need to know when they’ll be expected to make their loan payments. Will it be monthly, bi-weekly, or something else? To ensure your clients get the best possible deal, you’ll want to set up a repayment schedule tailored to their needs.
It would help if you also reviewed any other fees or charges associated with in-house client financing. This way, there are no surprises down the road. Once your clients are properly educated on in-house client financing, you can move on to the next step: offering it as an option.
Determine The Terms You’re Offering
The next step in offering in-house client financing is determining the terms you’re willing to offer. When doing this, it’s important to consider the type of business you have and what kind of profit margins you can afford to work with. Remember that financing will likely result in a lower overall profit margin per sale, as you’ll be taking on the risk of non-payment yourself.
Your clients or customers will generally be paying a higher interest rate than they would if they went through a bank or other third-party lender. When determining your terms, consider the minimum down payment you’re willing to accept and how long you’re ready to finance the purchase.
It’s also important to clearly understand your company’s credit policy and what kind of credit score your customers or clients will need to qualify.
Set Up a System for Tracking Payments
Once you’ve determined the financing terms you’re willing to offer, setting up a system for tracking payments is important. This is critical to ensure you get paid on time and in full. Find the best system for your company in several different ways to track payments.
You may want to consider using accounting software that can track payments, or you may prefer to set up a manual system using a spreadsheet. Whichever method you choose, be sure to follow key information such as the date of the sale, the amount financed, the interest rate, the minimum monthly payment, and the due date.
Create an Application Form
The next step is to create an application form for your financing program. This form should collect basic information about the applicant, including contact information, employment history, and income. It’s also important to include a section on the form explaining the financing agreement’s terms.
Be sure to include all relevant information. With this form, you’ll be able to quickly and easily determine whether an applicant is qualified for financing. This way, you can avoid misunderstandings or surprises down the road. An online application form can be a great way to streamline this process. Just like water quality association certification, ensure your form complies with all relevant laws and regulations.
Make New Journal Entries To Reflect The Accounts Receivable
It is a critical step to make new journal entries in your books to reflect the accounts receivable. It will remind you that the customer has not yet paid for their goods or services.
The journal entry should include the sale date, the customer’s name, the amount owed, and the relevant account. Usually, the amount owed equals the total purchase price minus any deposits or down payments made.
Follow Up With Customers Who Have Missed a Payment
If a customer misses a payment, it’s important to follow up as soon as possible. It’s best to reach out via phone or email to avoid any potential misunderstandings. In your message, include the amount owed, the date of the missed payment, and the date of the next payment.
You may also want a brief reminder of the financing agreement’s terms. If the customer cannot make their next payment, you may need to consider offering them a grace period or extending their financing agreement.
Ensure That Your System Is Secure
When you’re dealing with sensitive financial information, it’s important to have a secure system in place. This means ensuring that your website is encrypted and that your payment processor is PCI compliant. It would help if you also consider investing in fraud detection software.
Taking these precautions can help protect your business and your customers. The credit card number should also be encrypted so that it can’t be read by anyone who doesn’t have the key. With a security system in place, you can give your customers the peace of mind that their information is safe.