Credit Applications

Company’s often spend more on the lease for their offices than their credit application and as a result it can leave them open to be exploited by the unscrupulous due to serious deficiencies in the document.

Knowing what clauses to place in your terms of trade is extremely important  and can save a business thousands of dollars in lost revenue and recovery costs.

The final document should comply with all legal and legislative requirements particularly in regard to such issues as privacy and disclosure along with authority to conduct enquiries and the basics of how business is to be conducted between the parties to ensure no misunderstanding from the outset.

Do not copy another company’s application. Often your business may have some unique aspect that needs to be built into the terms and conditions.

The size and layout of the application also needs to be relevant to the industry you are in so as not to make it too difficult for an applicant to complete. No customer credit account should be established without a signed credit application and this procedure should be written into the company credit policy.

Costs of recovery including legal proceedings for overdue accounts can also be included to make the customer liable for them. Personal guarantees from a company director and the like can be included providing added protection for unpaid accounts.

If your current document does not contain any of the items mentioned or is in excess of 6 years old it is clearly time to review your current credit application document.

What should a Credit Application do for you ?

• Firstly it is a legal document and should be treated as so.
• It should clearly identify the legal entity of both parties particularly the potential customer.
• Explain the terms of and conditions that your business is prepared to extend credit terms on.
• Upon signing it is legally binding.
• Maintains a profitable customer base.

Practical experience and knowledge rather than legal theories are essential to it’s compilation. In addition, it must be a workable and enforceable document. 

Preparing a document for your business

In the preparation of the document DEBTFORCE will conduct the following:

• Assess and report on the current application document
• Conduct an interview to review the business processes and identify any deficiencies or problems that need to be rectified
• Prepare a draft document
• Client consultation, review and discuss
• Final document
• Acceptance and implementation by the business