So, you have decided to offer credit. What next?
It is stating the obvious – and let’s be frank, much that is said within these blogs will be common sense – but it is important to know your customer to do an adequate risk assessment, ensure your invoices are correctly issued and ultimately know who to take legal action against if it all goes horribly wrong!
Much of the information required can be obtained by using a fairly simple application form which should include your Terms and Conditions – needless to say if you need assistance preparing the application, contact me. Information obtained from a correctly designed application form will include:
What is their legal status? Sole Trader, Partnership, Limited Liabilty Partnership, Limited Company or PLC
Address details – this will include the private addresses of directors and partners as well as details of where invoices need to be sent
Does the company need to provide you with an official purchase order?
Contact details for the purchase ledger clerk. Who is responsible for paying the invoice?
What level of credit is required? Note – this is not the same as the level of credit you are prepared to offer
Bank account details and authority for Bank reference to be obtained if required
The application form should be signed and the wording will make it clear that the signatory is accepting your Terms and Conditions of trade and giving permission to undertake credit searches on individuals. Take note that it is not possible to obtain a credit reference on an individual (e.g. business owner, director) without their signed permission – where possible therefore all directors and owners of the business should sign the application
When this is obtained and completed to your satisfaction you can move on to the credit assessment (the subject of the next blog) – never allow yourself to be pushed into making a decision before all the required information is to hand. If a prospective customer needs an answer now, then the answer is NO!