Opening a trade account: what has to be collected before the first order

What an account actually has to establish #

A trade account is a standing agreement to hand over goods before being paid. Everything on the application form exists to answer one of five questions, and it helps to be clear which is which.

• Who is the legal entity?

  A limited company, a partnership, a sole trader, a group buying under one name with several delivery points. This decides who you can pursue if it goes wrong.

• Who is allowed to order?

  Named people, or anybody who rings up and knows the account number. This is decided at opening and rarely revisited.

• Where do goods and invoices go?

  Often three different places: trading address, delivery sites, accounts mailbox or portal.

• What are they entitled to pay?

  The band, the specials, the carriage rule. This is the input to every future price and quote.

• How much credit, on what terms?

  The only part that is genuinely a judgement call.

The first four are collection and verification. The fifth is a decision.

What is free and public, and mostly unused #

A striking amount of what trade suppliers ask customers to supply on a form is already published and verifiable, which makes it a transcription exercise rather than an information exercise.

Those alerts are a better early warning than an annual credit review. A separate register of disqualified directors is published alongside it.

HMRC's Check a UK VAT number service confirms whether a VAT number is valid and gives the name and address it is registered to. If you are VAT registered yourself, it will also record proof of when you made the check, which is worth knowing because the usual weakness in an account file is not the absence of a check but the absence of any evidence it happened.

None of this replaces a credit reference. It does mean that a good proportion of the application form is asking the customer for facts you could have looked up, and each of those questions is a place the application can stall.

The obligation people forget #

If your business accepts or makes high value cash payments of 10,000 euros or more, or the equivalent in any currency, in exchange for goods, you must register with HMRC as a high value dealer.

This is a trade counter issue more than an account issue, but it belongs here because the control has to exist before the cash is offered, not after. A depot that takes occasional large cash payments and has never looked at this has an exposure that no amount of careful account opening will cover.

The terms you set now decide the chase later #

Whatever terms are agreed at opening are what your credit control will be enforcing for years. GOV.UK states that agreed business to business terms should not exceed 60 days unless a longer period is fair to both businesses, and that without any agreement payment is late 30 days after the customer receives the invoice or you deliver, whichever is later.

The practical point is that vague terms at opening are not neutral. They hand the customer the definition of late, and everything on the credit control page becomes harder to run because the first question in every chase, is this actually overdue, cannot be answered consistently.

Which parts run on rules #

What to measure #

Time your last ten account openings from first enquiry to first order, and split the elapsed time into three buckets.

• Waiting for the customer

• Waiting for you

• Waiting for a decision

In most trade suppliers the middle bucket is the largest and the least visible, because nobody owns it. Then check how many existing accounts have a credit limit that has not been reviewed since opening, which is the same problem viewed from the other end.

The admin time calculator will price the office hours involved. If you want the wider view of what arrives in the same stream as account applications, that is the depot inbox.