The decision to extend credit to your customers is based on your credit policy. Depending on your credit policy, the time involved in the decision making process can add a significant number of days to your cash conversion period. The call for a credit decision is likely to arise in one of two situations. The first is when you are deciding to raise the credit limit for existing customers or clients. The second credit decision arises when you are deciding to extend credit to new customers or clients. In either situation, the key to accelerating the credit decision is to do some of the credit decision work in advance of the customers' orders for your goods or services.

With existing customers or clients, it is best to anticipate a raise in their credit limit whenever possible. This can be accomplished by looking at the customer's current credit limit, and comparing it with your expected levels of business with them. You can avoid delays in fulfilling their order if you can make your credit decision well ahead of the customer's request for a change in their credit limit. Anticipating existing customers' credit needs can significantly reduce your cash conversion period, and impress the customers at the same time with your willingness to extend their credit limit!

The credit decision for new customers or clients can be more difficult and time consuming. The main reason is that you don't have past business relationships with the customers or clients to use as a basis for your decisions. Checking the customers' credit references, obtaining credit reports, and checking with the customers' banks can be a time consuming process. Delaying your credit decisions beyond a new customer's expectations increases your chances of losing the sales and the customer.

However, anticipating the credit needs of your new customers can significantly reduce the amount of time it takes to make your credit decisions. Starting your credit decisionmaking processes when first meeting with new customers or clients is one way to reduce the amount of time it takes. Completing at least some of your credit decision prior to a new customer's order can significantly reduce the amount of time needed after the customer's order is placed. You may even impress the new customer with your commitment to ensuring that their order is not delayed any longer than absolutely necessary!