Not the credit you use, but the credit you provide to your customers - how much, to whom, and under what circumstances. Traditionally, credit in various forms has been used by businesses to stimulate sales, broaden their customer base, encourage additional purchases and generally facilitate other marketing activities. Properly controlled, credit can increase sales and bring in a steady stream of well-satisfied customers. Handled in a slipshod manner, however, it can cause an over-investment in accounts receivable, large bad debt losses, and even eventual failure of the business.

Many smaller businesses find that the selective and sensible use of credit is very helpful in building their business. They enthusiastically and aggressively use various credit techniques as an integral part of their marketing activities. Others feel they can get along very well without financing their customers and only do so reluctantly when they have to. Whether you fall into the first or the second category, broadening your understanding about the techniques available will improve your ability to use them to your advantage. Using them to your advantage means improving your profitability, and that's the bottom line.

Credit can be an important tool, but like any tool, to be effective it must be used correctly. We present a five-step approach that you can follow in controlling credit to your maximum benefit in your own business. Good tools, used properly, increase profits.