Articles

Give credit only when it is due!

This is a message to our trader, retailer and supplier clients. Start thinking more like a bank when giving credit to your customers. Many suppliers give large amounts of credit to customers – often on the basis of having a lengthy business relationship. Your bank does not think so generously – and neither should you.

Banks are very careful about examining your history and financial position before giving you credit and take as much security as possible for advancing funds. This places banks in an enviable position when things go wrong with their customers.

Suppliers often take a much more lenient approach relying on previous business relationship history or at best terms of trade to protect them. Having terms of trade is only the start. Business owners must follow through on the protection their terms of trade offer them. Business can be tough – so give yourself the best chance of getting paid.

Review your terms of trade:

• What security does it allow you to take?
• Take the security – don't just rely on the right to take it. Often it is too late to protect your position once the customer is in financial difficulty. To register a security charge against your customer on the PPSR (Personal Properties Securities Register) only costs around $3 but can greatly increase your rights to your goods taken but not yet paid for.
• Guarantees – they can seem possible – but look at the substance of the guarantor. Banks require statements of financial position before lending, so make sure you know the financial viability of not only your customer but the persons you are taking guarantees from.
• Have a policy for credit over a certain limit and stick to it.
• Make sure all your documentation has been fully and correctly signed and keep copies.