You company can't avoid extending credit to customers, especially if you operate in a B2B sales environment.
Customer credit is commonplace in the world of small business – but so are woefully inadequate credit analysis and tracking tools.
Comprehensive credit screening is a good first step in tightening up your company's financing program. Beyond that, you'll need to create a way to document credit approvals and record credit terms for each of your customers. New account credit approval forms are a written record of your credit relationships and the tool you need to maintain a watertight finance program.
The manner in which you design your new account credit approval form depends on your business requirements. However, a decent new account credit approval form should address several issues, including the following:
- Contact information. Accurate contact information is a no-brainer for inclusion in a new account credit approval form. This is the place to record the customer's official business name, contact names, billing address, employer ID number and other vitals.
- Sales representative. The credit approval form should also identify the sales rep who was responsible for landing the account. If there is confusion about terms, you will need to bring the salesperson into the conversation.
- Delivery terms. The delivery terms section specifies your company's responsibility in providing the customer with the products or services that are being financed. This might not seem important now, but if the relationship goes south this information will have legal value.
- Payment terms. Clearly describe the payment terms that have been specified in the contract. If necessary, go into excruciating detail to avoid a misinterpretation of payment requirements.
- Special arrangements. If concessions or special arrangements have been made, make sure to include them on the credit approval form to keep everyone working from the same page.
- Review & approval sign-offs. At least two sign-offs should be required on your new account credit approval forms. The first should be from the person who reviewed the customer's credit information and the second should be that of the person who was authorized to approve the request. Although a single signature would be easier, two signatures maintain appropriate checks and balances.