Credit Control – know your customer

Credit Control - know your customer

So, you have decided to offer credit. What next? It is stating the obvious 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. 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
  • Website information

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.

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!

This article has been kindly provided by Geoff Davis of GRD Credit Conrol Services. If you would like any issues or obtain any advice on setting up adequate credit procedures for your business feel free to get in touch with Geoff direct.