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Being careful with new clients / customers and the “gift” of cash

We all appreciate getting new business and we especially appreciate getting new clients. We might also
appreciate customers that pay in cash. That said, these days it is more important than ever to exercise
caution when extending credit.
If you have a cash and carry business or require paymen in advancet you can skip this post.
For those of us who are in a situation where we need to extend credit to stay competitive, I bring you
this tale of caution
One of our clients, a very busy manufacturer, had a new customer place a substantial order which they
then came to his premises to pick up. Everything went very smoothly, they paid for the order in cash and
took the material.
They were not asked to fill out a credit application nor to provide any further information then was
found in their email signature / letterhead.
Over the next 6 weeks they placed 6 more orders – all by email – which were filled and were to be
picked up when ready.
Though the orders were filled as they were received they were not picked up until the end of week 6
when the customer rushed in and took them all at oncebut did not pay for them, leaving a $25,000.00
With all of the activity in the warehouse no one noticed that this customer had no account set up.
Follow-up calls and emails went unanswered for months and our office had to be retained to collect the
monies owed.
Leaving aside the warehouse slip-up, what is needed with new clients is complete information on the
company, its principals, bank information and history.
At the end of the day a client should have a proven track record before you grant credit.
If you’re not comfortable granting credit you have the option of doing business on a COD basis or asking
for the owners to sign a personal guaranty.