Adeniyi Bamgboye
In Nigeria’s vibrant yet often turbulent economic landscape, business owners constantly wrestle with the delicate art of attracting and retaining customers. Among the most frequently employed, and perhaps most misunderstood, strategies are the offering of discounts and the extension of credit facilities. While these incentives may appear to be silver bullets, guaranteeing a surge in sales and a competitive advantage, they can also prove to be treacherous traps, undermining profitability and threatening long-term sustainability. The crucial question is: are Nigerian businesses truly maximizing the benefits of these tools, or are they blindly walking into a financial minefield?
Let’s be frank: the customer is not always right, and they certainly aren’t inherently entitled to discounts. These financial concessions should be viewed as strategic weapons, deployed with precision and foresight, not simply handed out as appeasement or as a desperate measure to match a competitor’s offer. Too often, Nigerian entrepreneurs succumb to the pressure of the marketplace, offering discounts and credit without a comprehensive understanding of the potential consequences.
The time has come for a more discerning approach. Before any business owner considers slashing prices or extending credit lines, they must engage in a rigorous self-assessment, asking the fundamental questions: are these actions truly aligned with my long-term business goals? Am I building a loyal and profitable customer base, or am I merely devaluing my brand and jeopardizing my financial health?
The proper implementation of discounts and credit facilities requires a multifaceted strategy, encompassing several critical elements. These factors, if diligently addressed, can transform these potentially dangerous tools into powerful engines of growth and profitability.
First and foremost, conducting a thorough risk assessment is paramount. This involves delving deep into the financial history and business practices of each customer before offering any form of credit or significant discount. Request references from previous suppliers, scrutinising their payment patterns and looking for any red flags that might indicate a history of delinquency or financial instability. If substantial credit is being considered, insist on reviewing financial statements, even if they are informal. Seek to understand their business model, their competitive landscape, and their overall financial stability. Building a personal relationship with the customer can also provide invaluable insights into their character and their commitment to fulfilling their obligations.
Equally crucial is the establishment of clear and concise terms of payment. Ambiguity is the enemy of sound financial management. Spell out the exact payment due date, the acceptable methods of payment, and the penalties for late payments. If possible, seek to secure the debt with collateral or a personal guarantee. Consulting with a legal professional to ensure that these terms are legally enforceable under Nigerian law is a wise investment.
Invoicing immediately upon the delivery of goods or the completion of services is another vital step. Delaying invoicing creates unnecessary risk and delays payment. A professional, accurate invoice serves as a clear reminder of the customer’s obligation and encourages prompt payment.
Effectively managing receivables requires a proactive and disciplined approach. The days of relying on manual spreadsheets are long gone. Automating the accounting and invoicing process is essential for tracking payments, generating reminders, and producing accurate reports on outstanding debts. Choose accounting software that integrates seamlessly with other business systems and provides real-time visibility into your financial performance.
Finally, a robust and consistent follow-up system is non-negotiable. Don’t be afraid to gently but persistently remind customers of their outstanding obligations. Implement automated email reminders and follow up with personal phone calls or emails when necessary. Establish a clear escalation protocol for increasingly overdue invoices, involving senior management or even engaging a debt collection agency as a last resort.
In Nigeria’s challenging business environment, offering discounts and credit facilities can be a calculated risk that yields significant rewards, but only if approached with prudence, diligence, and a strategic mindset. By taking the time to assess the risks, establish clear terms, automate processes, and implement a robust follow-up system, Nigerian businesses can transform these potentially dangerous tools into powerful drivers of growth and lasting success. The key is to remember that a sale is only truly successful when the money is securely in your bank account, fuelling future growth and ensuring the long-term viability of your enterprise.
Dr. Adeniyi Bamgboye, DBA, FCTI, FCA, FCCA, a dual qualified chartered accountant, tax expert, and policy analyst, is the managing partner of Empyrean Professional Services, an audit, business, and financial advisory firm dedicated to enhancing its clients’ business value. 08060603156; [email protected]
Source: Businessday.ng | Read the Full Story…
