- 1. Establish
a Credit Policy
- Set the rules
under which your business will grant credit and expect accounts to be paid.
2. Use a Credit Application Form
- Obtain detailed
information identifying the credit applicant, and the amount of credit sought.
The credit application should include full names, past and present addresses,
employment details, trade or account references and identify the applicants'
principal trading bank. The credit application should also include clauses
allowing the recovery of collection costs and clauses which meet Privacy Act
3. Seek Personal Guarantees
- Where the applicant
is a firm or company, personal guarantees should be secured from the proprietors
or authorised persons (preferably the directors) as appropriate.
4. Credit Check
- Verify the
information on the credit application and then conduct a TCS credit check.
5. Advise the Applicant in Writing
- of your decision
to grant or deny credit. Where granting credit, set a limit you are comfortable
with and reconfirm your credit terms. Where credit is being denied, invite
trade on a cash basis with an undertaking to review the application after
a suitable period.
6. Statement of Account
- should read
either 'current' or 'overdue'. The inclusion of 30, 60 or 90 day balances
encourages slow payment.
7. Monitor all Accounts Closely
- Follow up by
telephone immediately an account becomes overdue and agree a new date for
payment with your customer. Remember a lack of activity on your part will
invite a similar response from your customers. Pay special attention to new
account customers as they have yet to earn your trust.
8. Thank Customers for Payment
- An occasional
telephone call or note thanking a customer for payment not only encourages
timely payment but will assist to cement the business relationship.
9. Suspend Credit
- where a customer
has ignored requests for payment or not fulfilled their promise of payment
by an agreed date , they should be advised that their credit facility with
you has been suspended pending a more satisfactory arrangement on the account.
The customer should be invited to continue trading on a cash basis and will
be likely to accept if they are solvent and value the business relationship.
10. Act Quickly and Decisively
- Once you fail
to obtain a positive response from your debtor you should immediately commence
recovery action. The likelihood of a prompt settlement diminishes as an account
ages. Accounts lodged early get paid early!
Please remember, Tasmanian Collection Service is here at your service, happy
to advise on any specific problems or issues you may encounter in the setting
up or ongoing management of your credit policy