Business
FAQ
Frequently asked questions
free consultation for any commercial situation
Would you lend money to a stranger?
You’re not likely to lend money if you’re not sure you’ll get it back. When you sell goods or services to someone, you’re making a loan. That’s why it is important to run a credit check to determine your customer’s capacity to pay you back.
When should I authorize a credit assessment?
A credit assessment is recommended in the case of: see credit report for more details.
Why outsource credit services?
Reducing costs is one reason. See outsourcing for more details.
Why use an 8-day notice?
To differentiate between a negligent customer and one who is unable to pay, ensuring better collection results at little cost.
Why lose money on bad debt?
Too often, we take things for granted. For example, we pride ourselves on longstanding customers. See collection for more details.
Do companies always have a provision for bad debt forecasts?
Unfortunately not. However, every company should apply the accounting norm of 0.5% of annual sales volume, a provision that can help avoid a significant imbalance in annual profits or losses. It might also turn into a risk management solution for certain marginal customers with whom you wish to do business while ensuring greater profitability given the risk factor.
Do you know that the construction industry has an advantage over other sectors of the economy, which is the possibility of registering a builders’/mechanics’ construction lien (legal hypothec in Québec) on any project?
It’s simply a matter of observing certain formalities. An excellent means of protection. See construction credit for more details.
Why have customers sign a credit application?
To eliminate any doubt regarding the business relationship (privity) and agree on legal obligations that provides you with the best protection.
What is the difference between a trade reference sheet and a credit application (contract)?
A world of difference. A trade reference sheet gathers certain information about your customer, while a credit application (contract) is a management tool. See credit application for more details.
Is it possible to lose sales by requiring a signed credit application (contract)?
No, see credit application for more details.
Should a security be registered for each sale?
When the appropriate contracts have been signed, you can carry on sales without registering securities for each transaction. We have on hand all the contracts you need to secure your sales. See contract description for more details.
Does insuring my accounts receivable (credit insurance) mean that I no longer engage in risk management?
Unfortunately, many clients neglect managing credit risks by buying credit insurance. Insurers often limit the amounts they authorize, reject potential customers meaning that in the case of default, you assume the cost of the deductible and fees. In case of obvious litigation, claims are refused. That’s why you can’t rely on insurance to entirely manage your accounts receivable. However, as explained on this site, setting up a sound credit policy will enable you to recover eventual costs. Insufficient knowledge of your customer can harm your growth. See credit policy for more details.
Is having a registered lien condition on purchase orders and/or invoices sufficient to enable me to repossess my goods?
No, your lien must have been duly registered. See registering for more details.
How does writing off bad debt impact my profits?
Use the following chart to gauge the consequences based on your profit margin.
Isn’t a formal notice sent by my company as effective?
“I handle formal notices in-house” is something we often hear. It shows a lack of understanding regarding the effectiveness of third party intervention. When a collection agency and credit investigation permits to use a formal notice, the psychological impact is significant. Customers start to worry about their credit rating. Our experience confirms how using this service makes all the difference and gives effective results.
How important is a credit policy?
Every business should have a written credit policy in place, see investigation for more details.
How important is DSO: the average number of days it takes your company to collect revenue after a sale has been made?
It should of the highest importance, because it’s a measure of your company’s treasury operations. The goal is to keep cash flowing, reducing bank loans (credit lines) and allowing you to benefit from the best discounts from major suppliers. Other considerations include the potential reduction of bad debt and an increase in sales frequency. See the section CREDIT POLICY, which explains how to attain these results. DSO is calculated in the following manner:
