Creditors’ Rights 36
Q: I’m a business owner and have received credit applications from several potential clients. How do I differentiate between the “honest customers” and the “credit criminals”?
A: While the task at hand may appear to be routine and easy, it should never be taken lightly. The Get P.A.I.D.® System will help define the proper precautions to integrate the credit information with your credit policy. At a minimum, all applications must pass a good, healthy “sniff test.” Admittedly, that’s not a scientific term but we’re talking intuition here, which is more art than science. But remember, the sniff test – determining whether something looks okay or makes sense – is only the beginning. You should do a lot of detective work before arriving at a credit decision.
I recommend using the three “Cs” of credit: The Character of the borrower/customer, the Capacity of the customer to shoulder additional debt and the amount of Capital the customer needs to maintain a favorable asset-to-liability ratio.
How to assess the three “Cs” of credit:
- Check the white and yellow pages of the telephone directory. Many companies still feel that a real “phone book” listing is a marketing essential and will take care to see that the information is up to date.
- Calling directory assistance or searching online for the company’s phone number.
- Do a “Google” or other online search.
- Calling bank references. Local bankers may require a copy of the signed credit application with authorization to release information before answering any account questions on the phone or in writing.
*Learn more about credit policies and the Payment Gap with Bob Bernstein’s new book, Get P.A.I.D.TM A Guide to Getting Paid Faster (and What to Do if You Don’t!) at www.getpaidsystem.com
