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Conduct due diligence to avoid debt recovery. Learn why you should navigate potential financial risks tied to a new customer.

I want to share a story with you of a recent business I came into contact with. Optimum Recoveries have been working with this client, a business operating in the construction space.

Our client had begun working with a new customer and had sent them some credit documents to sign and return. The customer was a new business that had ties to some of the big construction companies currently facing financial issues.

The customer applicant reviewed the credit terms and their legal team crossed out a lot of the key clauses within the contract that provided our client with security, signed it and returned it to our client. The contract amendments varied the intention of our client’s agreement significantly in the customer applicant’s favour and well outside of our client’s terms tolerance. Unfortunately, neither our client nor their sales rep picked up that the new customer had crossed out all of the security terms and conditions within the contract and commenced trading with the new customer.

Fast forward a few months, and the goods have been sold but not paid for. It has come through to collection, for the monies related to the first sale, and the customer is not paying. They are not communicating, and the goods sold have been used in the customer’s manufacturing process.

This is the perfect example of why debt prevention is just as important as debt management and debt recovery. If our client had done their due diligence before taking on this new customer, they likely would have discovered that the customer had amended the agreements, that the business is less than a year old and that it has cross-Directors involved with a high-profile construction firm currently experiencing extreme financial duress and teetering precariously close to Liquidation.

If they’d reviewed and assessed the credit application returned and the applicant’s credit worthiness with a credit report these two red flags would have either avoided the debt OR triggered a Cash Before Deliver. Instead, our small business client is $30,000.00 in the hole, with little likelihood of getting it back.

Please reach out to me and the team at Optimum Recoveries if you’d like to know more about our debt prevention services. We can help you protect yourself and your business by reviewing your terms and conditions, as well as establishing solid procedures through every step of the process – from due diligence through to signed contracts and on-going monitoring.