When credit is granted, it is often with an expiration date or a payment date - this period is called the credit period.
The term "credit period" is used both when referring to credit in connection with the payment of an invoice, but it is also used to refer to the period during which credit has been made available at a bank or other lender.
Credit time in connection with an invoice
When a trader sends an invoice, the trader has the option of either demanding cash payment upon delivery of the goods or giving the customer a payment deadline of, for example, 7 days.
This period between the delivery of the goods and the time when the customer has to pay is called credit time.
The credit period can vary from company to company and from customer to customer.
It is basically up to the creditor/seller to determine their own payment terms, and the seller is therefore free to decide whether they want cash payment or choose to grant 90-day credit.
Credit time as a sales and competitive parameter
Many industries and companies are known for providing long credit terms, such as the food industry and the construction industry.
This means that many craftsmen can, for example, purchase materials and obtain a long enough credit period to be able to resell the materials before they have to pay themselves.
This means that the credit period has a huge impact on a company's cash flow. In many cases, a company can avoid having to use its own money to pay for materials and goods altogether if the credit period is long enough and the products are sold (and paid for) in time.
How credit duration is affected
Whether a credit period should be long or short basically depends on the seller's need to get money in the till quickly. It is therefore up to the seller to set their own credit and credit periods, although the market, industry or customers will often pressure the seller to provide longer credit periods if, for example, the industry and competitors provide long credit periods.
I praksis har købers (debitorens) betalingsevne og økonomiske situation også stor indflydelse på, hvor stor appetit sælger har på at yde lang kredit. Jo bedre økonomisk situation og historik debitor har, jo bedre kredittider kan man (teoretisk) opnå hos en leverandør.
Get help with your credit time
Med Qatchr får du et onlineværktøj til bl.a. kreditopslag og kreditmonitorering. Qatchr er med til at give indblik i dine kunders økonomiske situation og dermed gøre dig bedre rustet til bl.a. at undgå dårlige betalere.
With Qatchr's insights into your customers, you also get a tool that can help you calculate your customers' credit times and credit maximums.
Try Qatchr today and start working with your customers' credit times.
