Are you in the business of selling or leasing goods on credit? Do you have terms of trade? And most importantly, are your terms of trade effective – do they help make sure that you maximise your chances of getting paid?
Here are some tips and reminders for effective terms of trade:
- Have the terms of trade signed by the customer before supplying any goods. This helps avoid any contention by the customer that they have not agreed to the terms of trade and are therefore not bound by them.
- Correctly identify who the customer is. If it is a company, look to get personal guarantees signed by the director(s). Get authority to carry out a credit check on the customer in case you think it is necessary.
- Make sure that the terms of trade create an effective security in the goods supplied. If you are not paid by the customer, you will want the right to repossess the goods and have priority in any proceeds of the goods ahead of other creditors of the customer. To help with this:
- make sure that the terms of trade create a security in the goods
- before supplying any goods to the customer, register a security interest in the goods on the the Personal Property Securities Register (PPSR).
If you do not take these steps, you will be an unsecured creditor and will need to wait at the back of the creditor line for payment.
Our business law team will be happy to help you to create and maintain effective terms of trade for your business.
Our thanks to Chris Taylor for writing this article