In the thrill of getting a new customer and rushing to get that delivery off to your new potential debtor, isn’t it amazing how the business side can often be put aside, to be sorted out at a later stage. Big mistake!
There are two aspects which can so easily and methodically be dealt with, at the start out of a new business relationship and if properly done can drastically reduce risk and stress in your credit control.
APPLICATION FOR CREDIT
This should take the form of an easy to complete questionnaire and would elicit details such as the personality of the debtor business (e.g., company, close corporation, etc), physical address (you may have to serve summons at a later stage) and of course the obvious contact details.
You should also obtain personal details of the principals (shareholders, members, directors etc).
Get at least three credit references and make sure you check them out (it is amazing how this is neglected). The referees should also have had experience with your new customer over a period of time in getting payment from them. If the referee turns out to be a person who has only sold to the potential customer on a cash basis, then warning lights should go on!
You should always try and get a personal surety from principals, where the entity has limited liability.
STANDARD TRADING CONDITIONS
Reference to this (and acceptance of it) should be boldly stated on the application for credit, thereby linking the two and avoiding any debate at a later stage, as to what the contractual terms were.
The content of this will obviously vary from business to business, depending on particular needs e.g.: exchange rates (if an importer) or inclement weather (if a supplier of fresh produce), what interest will accrue, liability for payment of all legal costs necessarily incurred, consent to jurisdiction of the magistrate’s court etc. Small as they may seem, these details can make all the difference, in recovering debt when things turn sour. Consent to examining credit records, apart from its obvious advantage, will set the right tone, at the outset.
These standard trading conditions should form part of (reflected on the reverse, if possible) the credit application questionnaire and bold reference to them (and an acknowledgement of them) should appear, immediately below the signature (and date thereof) of the new customer.
A system much easier to implement than one would have thought!
DebtLegal will assist a new client with doing this, contact us for more information on this value added service.