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Does your credit application and terms of trade work when it has to?

By Paul Easton

Republish: EasyPublish™ Published: 10Aug2009 Word count: 405 Viewed: 65 time(s) Get Free Content For Your Site

In times like these, every business dollar has to count and the loss of any cash out the back door by way unpaid accounts places needless pressure on the business cash flow.

The provision of credit remains the foundation of the `Money Go Round' for New Zealand businesses, enabling one entity to do business with another while providing goods and services on a basis of trust, but those goods and services must still be paid for within an agreed time frame if the business is to survive.

In a perfect world it's a great arrangement - that is, until the unscrupulous take advantage and break the rules forcing the business to protect its income by minimising its exposure.

To protect itself, a business must actively take steps to mitigate loss or potential future losses caused by customers who do not pay on time or in some instances not at all.

In my capacity as Managing Director of DebtForce Limited, I see a great many companies spending thousands of dollars on loss prevention methods at the front of their business but fail to see what is slipping out the back door when the credit application and terms of trade are ignored.

Indeed, It never ceases to amaze me how overlooked the importance of the Credit Application is and how businesses are all too often prepared to spend more on other documentation instead.

As a result, businesses are often left open to exploitation due to deficiencies in the document, or when there is no document at all.

There are a number of professional debtors who are experts at exploiting the weaknesses of a company's credit agreements and its credit approval processes which often allow the debtor to walk away from overdue accounts.

Unfortunately, in such cases, the law does not view such matters in the same light as shop theft, for instance, though in my opinion, it is much the same.

A credible credit application and terms of trade document should always be the critical starting point to covering that back door risk and a well designed document can afford good protection and suitable remedies when required when managed correctly.

The receiving of the signed credit application is only the first step in the credit approval process, before the formal information vetting of the application can commence.

To learn more about how a debt Collection agency can help you win this battle, check out the links below.

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