Competition often places businesses under pressure to make the sale on credit without thoroughly checking the credit credentials of the proposed customer.
If your organisation has a Credit Department, then it will usually be responsible for credit checking. For smaller organisations, credit checking is often non- existent.
The point of sale is, or should be, the beginning of the collection process. The more information obtained at the point of sale, the better your chances of being paid.
As a collection agency, by far the biggest problem we encounter is not being provided with sufficient information. An invoice made out to Dick Jones with no address shown, or a PO Box is not very useful. The usual explanation for the lack of information is 'but he comes here all of the time.' This may have been true. But that has now changed, the truth now is that he owes you money, and 'he no longer comes here all of the time.'
The first step to tightening your credit is to ensure that you have a properly designed Credit Application. It should ask the right questions. For example, no one lives in a Post Office Box; you need the address of the place of business in addition to the PO Box. Also get more than one contact name and telephone number etc.
Now that you have asked the questions and been have been provided with the answers, the next step is to check the accuracy of those answers. In particular, check the applicants credit standing with the credit references provided.
Of course no applicant is going to provide you with the names of organisations that they believe will give them a poor reference, or will they?
Most applicants know that credit checking is often not done, so check it anyway.
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