All 22 Credit Control questions
More in Credit Control
What are common credit terms and what do they mean? What is the purpose of a credit check before accepting a new customer? How do you assess a customer's creditworthiness? What is a credit hold and when is it applied? What is the order-to-cash cycle and where does credit control fit? How is credit exposure monitored on an ongoing basis? How should credit limits be reviewed and adjusted over time? How does a credit policy document support consistent decisions? What external data sources inform credit decisions? How should credit be handled for export/international customers?
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How do credit terms influence sales and cash flow?

Intermediate

Answer

Generous terms (longer credit, higher limits) can boost sales but tie up cash and raise bad-debt and DSO risk. Tight terms protect cash but may lose sales to competitors offering better terms. Credit control tailors terms by customer risk and strategic value to optimize the trade-off between revenue growth and working capital.
Real-world example Offering a strategic customer Net 60 wins a large contract, but credit control caps the limit and monitors the exposure closely.

Common follow-ups: What's the downside of overly generous terms? | How are terms tailored by risk?

Payment Runs Aging Analysis Credit Control
All 22 Credit Control questions