Be careful what you sign: Supplier Credit Accounts

Signing a supplier credit accountant

Be careful what you sign: Supplier Credit Accounts

Don’t rush to sign supplier credit accounts, advises Guidon Group Director and Chartered Management Accountant Tony McNally

In the current climate, you may be working on finding new sales that will help you become more resilient to the economic maelstrom that may unfurl as the Covid-19 pandemic recedes.

In your attempt to secure sales and service customers you may think speed is of the essence. Secure the sale, source the goods and supply them to generate revenue. But look closely at the supplier agreement.

You may have agreed payment terms with your customer and agreeing the same payment terms with your supplier would, by necessity, mean that when your customer pays you, you will be able to pay your supplier.

BUT what if your customer doesn’t pay? Your supplier will still press for payment and invariably will rely on the terms and conditions signed up to when you opened a credit account with them.

What are you signing up to?

It is important that you be wise before the event rather than after it. Most Ts&Cs are generic in nature. They govern the contractual relationship between buyer and seller and are normally very straightforward. They look and title of goods, payment and delivery amongst other legal context.

Increasingly, many Ts&Cs may now include a clause making the director or person who signed the agreement personally responsible for the debt of the company. One company where I have seen this clause included when opening a credit account is Plumbase and I am sure there are many others.

Buyer beware

In my opinion, this clause could be construed as unfair as it is,

a) not specifically pointed out to the signatory that it exists and;

b) that it can be a direct route to obtaining payment circumventing the collection of the debt from the company.

As always with these type of dealings, it is CAVEAT EMPTOR (buyer beware) and if you do not like this type of clause then I suggest you buy your goods from a seller who does not include such a hidden clause.

But you must read the Ts&Cs before signing them so that you can be personally protected from being sued for the debt of the company. Do not sign Ts&Cs to obtain goods quickly without looking at them first. Time spent reviewing them before signing could save you a whole lot of personal pain afterwards.

If you want to talk about supplier credit accounts or about your business and how to make it grow, contact us today for a no obligation discussion.