Reduce Bad Debt by Using Credit Application Forms
Hi, my name is Adam Stewart, Debt Collection Expert and owner of Debt Recoveries Australia.
A good way of preventing bad debts is having great systems in place at the beginning. One of the best tools you can have is a credit application form. Basically, this is a request, usually in writing, for an extension of credit. You can present one to your prospective customers if they are not paying upfront.
A valid credit application form will normally have the following:
• Type of credit requested
• Amount of credit extended
• Cost of the credit ( i.e. if you charge interest or a recovery fee on late payments)
• Security ( if you intend to ask or obtain security from your client)
• Clear outline of customer obligations
If you are not getting payment upfront from your clients, I strongly suggest getting each one of them to fill in a credit application form.
Most businesses who extend credit to their customers want to know who they are dealing with and the use of credit applications continues to be a valuable tool in preventing debts turning bad.
This is a great way for you to get to know your customer and it will send them a strong message that you are serious about doing business with them and also serious about getting paid on time. The information gathered on the credit application form also comes in handy, in case your customer does fall into arrears. It has valuable contact information that your debt collector can use to locate the customer and recover the funds.
This is also a good time to ask for trade references from your customer. Overall, it’s a good way to sort out the customers you really want to do business with. Any resistance on their part to complete an application form or provide references should be seen as a warning sign. If they do query it, you can explain to them that it is simply company policy and remind them that most credit providers such as banks and credit unions, require one to be filled out and that you are no different.
Please contact me if you would like some free, tailored credit application form templates, or advice on how to improve your current credit application forms. You may contact me at Debt Recoveries Australia at 1300 799 511. You may also email me at firstname.lastname@example.org or Skype at debtrecoveries.