What can go wrong when opening a new customer account?
After being in business for 35 years, it’s amazing how many times we see businesses make the same common mistakes over and over again.
These mistakes may be simple errors, made due to time-poor resources who have to make quick decisions. The pain does not occur at this point, but when your customers do not pay you, that’s where it all unravels.
The 3 fatal mistakes we see businesses make when opening a new customer credit account are:
- You don’t know who you’re dealing with – quite simply an account is opened up without the correct entity details and therefore you’ll be invoicing an entity who’s not responsible for paying. How many times does a salesperson walk in with a post-it note with a trading name written down saying ‘please open an account immediately for this customer who needs goods delivered immediately’
- The terms and conditions of sale are wrong or out of date – with any contract, when you need to implement action to recover overdue money, you need to rely on a document which is correct. So many businesses fail to compile terms and conditions which are relevant to their business. This makes it difficult to take action to recover outstanding money or deal with a commercial dispute.
- They fail to get security – Whilst we understand trying to obtain security from customers may reduce your competitive advantage, there are a number of ways to secure your position when a customer does not pay or fail. One of these is registering the goods you supplied on the ‘Personal Properties Security Register’ (PPSR). A simple registration of your security interest can mean in the event of insolvency, you can either recover your goods or seek payment from the administrator. You need to know who you’re dealing with and have the correct terms conditions in order to do this!
These 3 fatal mistakes mean at times, businesses are quite literally ‘gifting’ goods and their products to customers.
NCI’s Trade Credit Solutions can assist you with minimising these fatal mistakes and building credit systems and processes in your business to protect your profit and to grow with confidence.
For a free audit of your credit processes and a snapshot report on your top 5 customers. Click here to have one of NCI’s expert credit consultants meet with you personally for a no obligation consultation.