No matter how cautious you are in extending credit to your customers, in the end, the quality and contents of your credit application often determine how successful you will be in collecting your accounts. In fact, a good credit application can improve your chances of recovery before and after litigation.
But what makes a credit application good? And are those elements present in your company’s application? Get one out and let’s see.
Does Your Credit Application …
Clearly identify your customer? Before you extend credit, be sure you know who – or what – you’re dealing with. Is the customer an individual, a proprietorship, a partnership, or a corporation? It’s important to clearly establish who’s liable for the obligation.
Include credit terms that make provisions for attorney’s fees, late charges, and interest at the highest allowable rate by law? Without such provisions in writing, you may not be able to recover them in the event of litigation
Establish in specific terms when payment is due? For example, net (30) thirty days or COD. Leave no questions as to when payment is due.
Force the debtor to defend any lawsuits on your home court? With this provision, your collection cases will be heard by a local judge or jury, in the locale where your company does business, saving you travel time and money.
Include a personal guarantee? Many new and unknown companies without proven credit records will attempt to avoid personal liability by establishing a corporate account. This is OK, but it’s critical that you also get a personal guarantee.
Contact us for a free sample credit application