Posted by & filed under Bankruptcy, Collections, Credit.

Feb 20, 2019

Written By: Rod Wheeland, Wheeland Consulting

Over the years I’ve reviewed hundreds of credit applications used by trade creditors. They sometimes have a limited terms and conditions section – which sets expectations and the tone for the relationship. And they may leave out important provisions that give you a leg up in resolving delinquency. They also may cover the associated collection costs, should it become necessary to use a third-party to try to get paid. The most obvious provisions that help are listed below, and I’m sure there are many more depending on your product and industry.

  1. Customer agrees to pay according to the terms stated on Seller invoices. Require that any variance to these terms be agreed to in writing by the Seller. More and more customers try to set their own terms. The more responsible ones send you a letter about their intentions, and others just start paying you thirty or sixty or more days slow and tell you their proposed new terms when you contact them about the delinquency.
  2. All disputes of any sort will be reported to the Seller within a set time period, usually thirty or sixty days, and discrepancies of any sort will not be considered after this period. This encourages responsible action by the Customer and reduces the likelihood of the post-audit-claim circus arriving at your door.
  3. The Seller requires returns to be pre-approved with a Return-Merchandise-Authorization. The Seller should be aware of product Customer proposes to return and may wish to charge a restocking fee. The Seller should not be forced to accept a truck-full of dated or shelf-worn product that arrives at a warehouse in payment of delinquent invoices.
  4. The Seller will have right of offset for any credits due the Customer. The Customer may be due or may have account volume rebates or advertising credits or other forms of Sales program credits, and these should be used to offset any delinquency.
  5. The Customer agrees to pay all costs of collection, including collection agency fees and costs, attorney fees and costs, and any court costs. More and more courts include these fees and costs in their judgments. The Creditor-Seller’s collection costs should be recognized in a judgment or a settlement when required to go this route to seek payment.
  6. The Customer agrees to venue and choice of law. Do you really want to go to Texas or New Jersey to enforce your right to payment? Do you really want to be subject to the law in Louisiana or Florida? Specify where legal action takes place by county and state, as well as the law of the state you prefer.
  7. The Customer agrees to waive jury trial. Juries tend to look kindly on locals and small businesses and sometimes see corporations and out-of-towners as villains. Judges tend to pay more attention to the facts (usually!).

Your attorney will give you the appropriate verbiage for any of these provisions and any others you may have in mind. Take the strategic view and get a leg up on potential issues in the relationship!

And don’t forget to participate in continuing education in collections! NACM Commercial Services will offer a class May 9, 2019, Collections – Soup to Nuts! Go to www.nacmcs.org/education for more information and to register.

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