Disclaimer: The content of these articles is to be used as a general guide only. Professional advice should be sought before taking any action relating to the points discussed in these articles.

THE CREDIT APPLICATION FORM 

Do you really need a credit application form?
  Of course we need a credit application!  And I would completely agree with you for new customers spending $500 or more.  However, if you are a company that has many small transactions I would just not bother with a credit application or a credit check on these small transactions.  Whether you make it under $500 or under $200 is up to you, but the point here is that your credit policy should be flexible enough to allow for these small first time customers.
  While most people understand the need for credit applications, think of the time and cost saving both to you and your customers by not having to fill out a credit application for a small $150 order. Sure, you will lose some money as bad debts, but this will be more than offset by the time savings and money saved by not conducting a credit check on these small transactions.  Best of all, your new customer is not inconvenienced in any way and they are left with a good first impression.
  What do you do if you offer credit on a small initial order, say for $100.  Then, a short time later, this same customer requests credit for a $3,000 order.   This is the problem with granting credit automatically with an initial order but it can be overcome in one of two ways.  You can ask if the customer minds completing a credit application form.  Most of the time, this will not be a problem.
  Alternatively, you could state with your first order that their credit limit is $500 or some other appropriate amount and future orders above $500 require the completion of a credit application form. 

What is contained on a credit application form?
  There are several text books available which outline in much detail what to include on a credit application form.  But most importantly, make it easy for your customers to complete.  Some items you should ask for include:

• Company Name

• ACN Number

• Trading Name

• Owner's Name and Address and Phone Number

• Directors' Names and Addresses and Phone Numbers

• Banking Details

• Three Trade References

• Signature

• Date

• State your Trading Terms

  You may wish to ask for more financial details such as company assets and profit.  Very likely, if an individual is applying for credit you would need details on that person's income and assets.
 

This article is reprinted from Rentons' Business Tips No. 4
© Copyright February 1999 ACS