Tip sheet 6, simple steps to improving your account opening process – but will this help your internal credit control?
Many difficulties faced by businesses in their credit control procedure stem from defects in the initial account opening process. Where a business grows, it might be that the account opening process is not updated to reflect problems that are experienced by the credit controller when chasing debts. Below are some simple steps that might improve your account opening process and which will assist you should your customer fail to pay its invoice on time Account Opening Process 1.Regardless of whether your business supplies goods or services and regardless of whether orders are placed in person, by phone, by email or online, you should have a standard set of questions that need to be answered by your customers before you open an account. Unless you take full payment from your customer upfront, you will be offering your client credit on the goods / services that you are to supply. 2.You should ensure that you use a standard account opening form, which could be in a paper or electronic format. Examples of the information that you should take from your customer, to make life easier when addressing credit control, include; •The full name of the business that will be liable for payment This might sound obvious, but examples of difficulties that can occur include; 1.Where your customer trades through a different name to the actual business that sits behind. For example, if your client is a restaurant, pub or theatre (e.g. The Coopers), it might be that the name of the business that runs The Coopers, is Coopers ABC Limited. If the restaurant or pub fails to make payment, you would need to sue Coopers ABC Limited and therefore, if you do not know the name of the business behind the restaurant or pub, you will find it very difficult to issue proceedings in respect of an unpaid invoice. 2.Where your customer just gives its trading name but fails to indicate whether it is a Limited Company. For example, if your customer tells you its name is ABC, you should check if the Company is in fact ABC Limited. Limited Companies are a separate legal entity and therefore, if you issued proceedings against ABC when in fact, the customer is ABC Limited, the claim may well be struck out. •The trading status of your customer You should always ask whether your customer is a Limited Company, Limited Liability Partnership, Partnership or Sole Trader. Without this information, you will not know which legal entity to issue proceedings against, should your invoice be unpaid. This may mean that you are forced to write off valid debts purely because of lack of information. •The address for delivery of goods / services •The address for the Payee / Customer This address might be different to the address for delivery of goods and services. Therefore, unless you take the address for the payee, you will send the invoice to the incorrect address and it might be that the Payee / Customer does not then receive the invoice. •A contact name, in the accounts department, to whom your invoice should be sent. Sending the invoice directly to the person who will arrange payment, will mean that there should not be any unnecessary delays in processing payment. To receive further fact sheets or for further information about our commercial debt recovery service, please contact Rita Wright of Breeze and Wyles Solicitors on 01992 558411