Modern day business to my extent of knowledge are running because of credit in business only. Credit can be in any form, credit from suppliers or credit to distributors and in the end credit to consumer.
Most of people prefer purchasing things on credit cards or in ancient form of credit from the known once. Our economy is going through a phase where, the actual money has just got exhausted and only debt is circulating.
Buying things on credit has became a part of our lifestyle now a days. Earlier it was limited to only buying on credit from the people we know or the people who know us. But now credit has become such a facility that is so convenient to access. There are several banks providing loans on and for various things. It was good because till then you need to have a good CIBIL score and mortgage to procure a loan and it was mostly taken for bigger purchases.
The credit cards – irresistible instrument.
Soon the banks introduced credit cards, purpose of which was to allow people to spend money which they didn’t procure.
The credit cards now became a fashion and have already replaced bigger loans from bank and addicted people to paying in instalments.
So now what people do is, buy things on credit wether from credit card or from a known person and pay the minimum so as their credit doesn’t get affected.
Which in long term accumulate debt on them pile over pile, on which banks charge heavy interest or their known once keep calling them to pay back the debt they own.
How credit is a boon & ban for business owners?
Credit as a boon can be seen in a way that , as a retailer you can buy goods worth rupees for say 1 lakh and pay 50 thousands at the moment and rest as per their convenience in the term agreed.
In this way the business owners do not have to necessarily block all their money in inventory and keep the rotation of money going on.
But on the one hand where credit is boon for business owners while getting from the above supply chain. On the other hand it can prove to be harmful when passed on to other person.
See the manufacturers of certain things are limited but the traders are unlimited so the manufacturers have a hand over traders that if payment is not on time their supply can be interrupted.
But on the other hand, it is not possible for traders to force stop credit because traders are present in large number. If one blocks the goods other one will keep the supply going.
So how can you escape the cycle of credit and debt ?
As a traders –
- Buy and sell only on cash payment terms. This simply means procure goods by paying in advance or immediately after delivery of goods. And on the other hand sell the goods in cash so you don’t have to necessarily worry about collecting debt.
- Use limited resources wisely – See the money you procure will be limited to a certain amount therefore you need to use it wisely and divide it proportionally in stock and debt. To not disturb the cycle.
- Accumulate credit in business for short span – The goods you buy on credit from a supplier should be settled of as soon as possible therefore it doesn’t accumulate.
As a consumer –
- As a consumer, you can buy whatever you want to but first see if you own that amount of money with you in your debit card or cash.
- Don’t fall for discounts on credit cards, etc. Because in initial days this all looks fancy but with time you develop a habit of buying things on debt and paying only the minimum amount which in longer run would accumulate a lot of personal debt on which heavy interest would be levied.
Conclusion :
Credit in business or in general is good till when you can pay entire amount one go. There should be no such borrowed money that you can not pay in less time. As credit in business or in general procured for longer duration become the cause of humiliation.
