How to Decline Credit and Still Keep Your Customers

Offering a credit account facility can be an attractive option for business customers. It can provide a convenient way to pay for many items all at once on a set date and can assist with organised record keeping. To ascertain whether a customer is credit worthy, businesses typically use credit scoring as part of their credit control to assess the risk or recommended amount they should offer. Unfortunately, not every customer is deemed to be a safe bet, which can lead to the customer feeling embarrassed, confused or angry.

Customers are the lifeblood of every business so dealing effectively with those who have been declined credit can be the difference between repeat custom and a long working relationship or them taking their business elsewhere.
Risk score for business customers

Take your time to analyse the credit score or rating provided in your credit check report. It is important to understand why the company may be a higher risk before you can deal with the situation.

The risk score or rating will indicate the credit worthiness of the customer and the likelihood of insolvency. The credit report may also show if the company pays its suppliers on time, details of overdue payments and if there are any outstanding county court judgements against them. The information offers a good guide as to whether the company is a high risk or not and offers flexibility over the impending decision.
Explain briefly the situation

Whether the conversation is face-to-face or over the phone, explain to the customer that unfortunately you won’t be able to offer a credit account at this time. Say that you may be able to offer an account in the future; perhaps in 6 months and that you value their custom. The customer may ask for the reason why the decline has happened. While discussing confidential business data would be inappropriate, giving the customer an overview of why they were declined may help appease them, such as they have not been trading long enough yet. Ensure that any conversation you have is discreet and cannot be heard by other customers or staff. Choose a private area where you can give the customer your undivided attention so they you can gauge how they are feeling and turn any negative reactions into a positive outcome. Speaking with the customer is always a more successful step than sending a letter as it is harder to deal with the situation immediately.
Empathise, do not patronise

If the customer is angry or upset, empathise by explaining that you understand that they are disappointed and that you would like to find another payment solution for them. Actively listen to how they are feeling; often when customers get to say all the need to, they calm down. Avoid interrupting them regardless of how enthusiastic you are to help. Allow them to express their opinion without passing judgement so you keep your professional integrity.

Many businesses score credit worthiness using different criteria so they may be confused if they have credit accounts elsewhere. If this is the case, asking for trade references could be of benefit particularly if the risk dashboard is showing that they are on the cusp between credit worthiness or not. Offer an alternative as a solution where possible so that you are increasing the chances of retaining the customer.
Offer alternative payment solutions

Depending on the information provided on the risk dashboard, you may decide to offer a smaller amount of credit with shorter repayment terms. Include a retention clause in the terms and conditions whereby you would keep ownership of the goods until full payment is received.

Another agreeable solution could be to offer a deposit facility where the customer pays an upfront fee into their account and then payments are deducted from their account when a purchase is made. This could be a good option if the customer wants a simplified accounting method. A post-dated cheque system could be offered if the customer is planning to make regular purchases for set amounts.
Ask questions

Ask questions to find out what the customer actually wants and if any solutions offered are acceptable. Let them know throughout the conversation that you value their business. Always remain calm and polite no matter how irate the customer is and keep them talking until you are confident that they will return.

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