USING A BUSINESS CREDIT APPLICATION FOR YOUR COLLECTION STRATEGY

USING A BUSINESS CREDIT APPLICATION FOR YOUR COLLECTION STRATEGY

When creating a collection strategy, the best place to start is creating a business credit application for customers. A business credit application helps you to decipher who is the biggest credit risk and who you can safely extend credit to without much worry. If you’re a company who works with other businesses and often extends credit, you should be using a business credit application. In it, you can gather important information, such as trade references who can vouch for whether the customer will pay you on time.To create a business credit application, you will want to start with the applicant’s name. This is typically the owner or CFO. You will want to gather the formal name of the business, their DUNS number, the business address and any other important general information about the business.

Next, you will move to more in-depth company information. You will want to know when the company started. If they have been around for a decade or longer, you can typically assume that their credit risk is lower because they have been able to successfully manage their finances for so long. If they are a start-up, you may consider their credit risk to be higher. You will want to ask what their total and current assets are, annual sales, after tax profit and what credit limit they are requesting. If their liabilities total more than their after tax profit, you may want to look further into this company and extending them credit.

The next portion of the business credit application is their bank references. The bank references can give you a good idea of how much the company has in resources. If you have permission to speak with the company’s banker, you may get some good insight into how they manage their financials.

Finally, one of the most important sections of the business credit application is the trade references. These three references are other companies who have already extended credit to the customer. They will be aware of how often they pay late or on time, how much they have extended and how long they have been a customer. These are the best insights on exactly what kind of customer the applicant will be.

A business credit application sets the stage to a good collection strategy. No matter how aggressive your collection efforts are, if your customer doesn’t have the funds to repay you or doesn’t care to, you simply won’t collect on time. However, if you use a business credit application and only extend credit to customers with good credit history, you are guaranteed to improve your collections. Download our template below for a good place to start.

BUSINESS CREDIT APPLICATION TEMPLATE

Why waste time creating your own?
Download our template

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