Internal Credit Control

Credit Policies

This article focuses on Commercial B2B Credit Collections.

This series of articles come from a fantastic publication put out by the IACC  (International Association of Credit Collectors).   It is well grounded and fundamental advise that should be ready by any professional involved in credit collections.

When extending credit to a new customer, the following basic information should be gathered for your credit evaluation and kept on file:

• How long has the applicant been in business?

Statistics show that 50 percent of business failures are firms less than one year old, 75 percent are less than five years old.

• At what bank does the applicant do business?

What is the average size of his bank balance and are there any loans outstanding? The customer may have a financial statement which will reveal this, and certainly a phone
call to their bank manager is in order. They might only confirm the existence of an account, unless your customer pre-approves release of the details. A carefully worded and signed application will gain you the most information.

• What do the records show?

Are financing agreements kept, or have legal suits been filed? If the amount of credit requested is substantial, additional financial information may be secured from an outside credit
information source such as another supplier, trade association or business reference.

• What are some of the business firms with which the applicant is currently dealing?

You will want to check with at least three companies to determine how much credit has been extended and the creditors’ payment experience with the applicant company. This procedure may help you and other businesses in exposing customers who exploit their suppliers.