Guides · For credit sales · 7 min read

How to run credit sales and hire purchase without losing money

Pricing, down payments, instalment plans, collections and document release for businesses that sell phones, motorbikes, solar and appliances on credit.

Selling on credit lets customers buy a phone, motorbike, solar system or fridge they could not pay for in cash. Done well, it grows sales and earns a margin on top. Done badly, you are left with stock out in the field and no money coming in. These are the parts to get right.

1. Price the credit honestly

Set a credit price above the cash price that covers the cost of waiting for your money and the customers who will not finish paying. Show the customer the cash price, the credit price, the down payment and every instalment before they sign.

2. Take a real down payment

A down payment shows the customer can save and gives them something to lose. Many sellers ask for 20% to 30%, more for items that lose value fast.

Worked example

3. Keep ownership until the last payment

Under a hire-purchase agreement the item usually stays yours until it is fully paid. Keep the logbook, warranty card or papers, and release them only when the balance is zero. Follow your country's hire-purchase and consumer protection law on what you may do if a customer stops paying.

4. Make paying easy

Let customers pay by mobile money, send a reminder before each due date, and give a receipt every time. Most late payments are forgotten payments.

5. Watch arrears per sale, every week

Look at which sales are late and by how much, every week. A customer one instalment behind is easy to talk to; three behind is a write-off waiting to happen.

6. Reward early payoff

Offer a small discount for paying off early. You get your money sooner and the customer comes back for the next item.

Prograte keeps your catalog, plans, down payments and instalments together, collects by mobile money, shows arrears per sale, and marks documents ready for release when the last payment arrives.