Top 5 Credit Application Issues and Fixes
The simple Credit Application can make or break debt recovery success of your organisation. The time and effort it takes to ensure that your organisation’s Credit Application is correctly worded will be paid back tenfold when trying to recover debts from tardy customers. Below are the Top 5 Credit Application Issues and Fixes to Note:
1. ISSUE: You believe that you are dealing with Jo Blogs but you are actually dealing with XYZ Pty Ltd.
FIX: Know who you are dealing with - request the applicant to provide a company certificate or business name registration when applicants apply for credit at your organisation. Your organisation can do a free search on: https://connectonline.asic.gov.au/RegistrySearch/faces/landing/SearchRegisters.jspx?_adf.ctrl-state=z3o9p12b2_4
2. ISSUE: the company/business who owes the debt states that the person who placed the orders had no authority to place the orders.
FIX: Request a letter of authority from the customer to state who has authority to place orders on behalf of the customer (eg Jo Blogs and John McDodge have authority to place orders on behalf of ABC Pty Ltd).
3. ISSUE: The customer has a few invoices overdue but some not yet due. Your organisation will have to either commence two separate legal proceedings or wait until all invoices become due and payable.
FIX: Ensure there is an acceleration clause in your Credit Application which will mean that if one invoice becomes overdue, your organisation will be able to commence legal proceedings and claim for other invoices even if they are not overdue.
4. ISSUE: Your organisation has a Credit Application that does not provide a personal guarantee so if a company customer goes into liquidation, there is no further recourse to recover the debt owed to your organisation.
FIX: Ensure your organisation’s Credit Application has a personal guarantee and ensure that any Credit Applications are not approved until the personal guarantee is executed.
5. ISSUE: Your organisation’s personal guarantee does not have a charging clause enabling your organisation’s debt in a guarantor’s property.
FIX: Incorporate a charging clause into your organisation’s personal guarantee.
Please contact Shine’s Insolvency and Debt Recovery department if we can assist your organisation to update its Credit Application.