by Leonard A. Bellavia, Esq.

When you complete a sale with a customer, the furthest thing in your mind is that you may have to sue the customer months or years in the future.  Most of your focus usually is on closing the deal, what steps you can take to make sure you do not violate the law, or how you can minimize the chance a customer may prevail against you in a lawsuit.  Today, we’ll address what you should do to prepare in advance for possible litigation against a customer.  Luckily for you, your company’s standard credit application is a great tool that can come in handy should you have to sue a customer.  In addition, processes that lead to completed credit applications aid both your company and the customer.

A plaintiff’s lawsuit does not end merely with ‘winning’ a verdict in court.  The real success of the lawsuit can be measured by the plaintiff’s ability to collect all or part of the judgment the court awards.  Many plaintiffs find it frustrating to expend legal fees to obtain a favorable judgment only to learn that they cannot collect it.  To effectively collect a judgment, you will need to be able to locate the customer and have details on the customer’s assets that may be liquidated or frozen to satisfy the judgment.  Your best tool to obtain the information you’ll need is your credit application.  Many salespeople and managers take shortcuts in completing the credit application, either by taking a ‘five-liner’ to gain just enough information to access the customer’s credit file, or fill out only what the bank asks to have completed.  Instead, use the credit application as an interview tool to gain as much information on the customer as possible.

Your goal should be to have each credit application filled out completely, and monitor each member tasked with gathering the customer’s credit information.  Typical credit applications have sections related to past employment, credit references (usually space for 3-5 individuals) and itemization of bank accounts, assets, etc.  A complete credit application may provide you with enough information to track down the customer and attach what assets he or she may have.  The completed credit application also gives your credit manager great information to tailor a credit presentation to the customer’s specific needs.  For example, if the customer discloses that he has little to no savings in his accounts, the credit manager could use that information to sell the benefits of credit life/disability insurance.  If you use a Customer Relationship Management (“CRM”) system to complete credit applications, your provider may aggregate this information into a wealth of reports you can use to hone your marketing efforts.  Customers benefit from your increased diligence too.  Completed credit applications help detect fraud and identity theft.

With so many benefits to both the business and the customer, you should make it your practice to have your staff complete each credit application submitted.  You never know when your attention to detail will pay off, either by being able to collect all or part of a judgment, increase gross profit, uncover fraud or catch an identity thief.

If you have any questions about your business’s finance and credit applications, please call us at 621-224-7000.