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Establishing Your Credit Policy

Before you start selling your product or service, decide what your payment terms are going to be.

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OK, so you've made the sale. But are you going to get paid? Before you extend credit, make sure you establish credit policies. Here's how: First, use a standard credit application form for every customer. The application should list the company's legal name, the name it operates under and the principal's names. It also should provide complete contact information, including who has the authority to make purchases and who to call about invoices, both physical and mailing addresses, phone and fax numbers and e-mail addresses, and any special instructions required.

Next, either on the application or on another form, clearly state your terms and the consequences for failing to meet them. This could include late fees, legal fees if action becomes necessary, and where any lawsuit would be filed. Of course, make sure the customer signs the document. And don't forget the obvious: Ask for and check credit references.