May 12, 2015

Qualifying new clients through a credit application form to secure payment of your accounts

The continued success of your business revolves around several key issues. Most important of all will be the recovery of accounts as quickly as possible. Cash flow is the life blood of your business.

Making sure that you have the best chance of having a 100% recovery rate for accounts paid will depend on how successfully you qualify your clients, particularly new clients.

So what is qualifying your clients all about. Put simply you qualify your client in terms of the client’s credit history – are they good payers or not – do they pay on time or not at all. Documenting this credit history through a credit application form is good business practice.

Documenting this credit history through a credit application form is good business practice.

If you have a company, qualifying your clients requires you to have the directors of the company provide you with personal guarantees. If your attempts to qualify your client result in the client company not being prepared or able to provide you with personal guarantees from the directors of the company then if the risk to you is increased, do you really want that client?

Qualifying clients is about reducing the level of risk or exposure. Ensure you follow the process to have the credit application form completed and reviewed.

Remember this – your account will include a number of component parts. Your time or the time of your employees – possibly the engagement of outside consultants or service providers – the supply of materials to comply the job just to name a few areas of expenditure.

So – what is essential is that you determine the level of risk or exposure involved. This should include, the likely return on your investment of time and product, but importantly an assessment of the creditworthiness of the client, before you start the job and spend your time, money and resources.

So – what is the important first step for you with a potential new client?

Complete the credit application form – don’t bother taking on the work of a new client unless you have qualified the client and obtained a completed and signed credit application form.

A quality credit application will provide you will valuable data and a good insight into a potential client and the financial stability and reliability of that client.

Details of references to other businesses which provide services to a potential client should be followed up. Generally a business operator will be forthcoming in relation to a non-paying or difficult client. You need this information to make an informed decision as to whether or not you want to take on a new client because apart from the time you or your employees might spend on a job for a new client, there is also the aspect of the materials used for the job.

How you can secure payment in the event that the whole enterprise of the potential client goes ‘pear shaped’ will be an important consideration when deciding if you intend taking on the new client.

You need to make sure that if you are going to invest lots of time, resources and materials in a new client that you will get paid. Having the potential client provide details of its asset base, its liabilities etc will allow you the best chance of ensuring that your bills get paid.

Remember – there are no sure things when it comes to having accounts paid. But what you can do is to do everything within your power to give you the best chance of getting paid.

To read more on qualifying a potential client, download our fee E-Book.

The development of this E-Book and other E-Books is part of a service which we provide to existing clients and others without fee. We know how hard it is to make sure that accounts are paid in full and in a timely manner and this is what drives us at Gayler Legal when it comes to assisting small business.