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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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7–38. Refer a Potential Customer to a Distributor

After reviewing a customer’s credit application, the credit department may conclude that it has no interest in providing any type of credit to a prospective customer. If the customer is not willing to provide either cash in advance or some form of security, there may be no further avenue for the company to make a sale.

Even if the company itself cannot grant credit, it is possible that a distributor will have a looser credit policy. If the company has a distribution network, refer the customer to a distributor. This approach can indirectly result in a sale for the company, though of a lesser size than it would have experienced with a direct sale (due to the distributor commission or markup). Nonetheless, if the credit department considers a customer to have significant credit risk, this may be a viable alternative.

Cost: Installation time:

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