Sometimes there is pressure from other businesses to provide credit, that is to enter into an arrangement whereby payment for goods or services is deferred. Whilst this is quite common, for obvious reasons it carries the risk of never being paid. In some circumstances a licence is needed to act as a credit provider, see Credit although this generally only applies when supplying goods or services to a consumer.
However, a business can legally demand payment in advance of delivery by either cash or bank cheque, generally known as COD (cash on delivery). Given the high level of debt, it may be advisable not to give credit as a matter of policy as debt recovery often fails to meet creditors' expectations.
There are ways to deal with business customers who ask to establish an “account”, including:
- Asking for a personal guarantee from the director of a corporate customer;
- Including a retention of title clause (ROT) in supply terms and conditions;
- Supplying goods on a consignment arrangement if appropriate;
- Following up payments early and imposing conditions on supply if payments are not made.
Additional details about these methods is discussed in more detail below.
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