Home' Australian Pharmacist : Australian Pharmacist April 2012 Contents 330 Australian Pharmacist April 2012 I ©Pharmaceutical Society of Australia Ltd.
is CEO of Prushka Fast
Debt Recovery, is
principle of Mendelsons
Lawyers and is the
author of two business
books, The Ten Mistakes
Businesses Make and
How to Avoid Them and
It may appear as an oddity to some that
in this day of credit cards and digital
payment systems, many pharmacies still
This is especially so for pharmacies in
rural areas and regional towns, as well as
pharmacies which supply businesses.
The upside to providing credit is that
it helps foster customer loyalty and
also encourages customers to spend
more, as well as purchasing items at
the pharmacy which may otherwise be
bought elsewhere. The downside is that
there is an administration cost involved
and there is also the risk of loss from
The administration costs have been
dramatically reduced due to use
of appropriate software, and the
loss from bad debts can also be
substantially reduced by following some
This, and two articles in coming issues
of Australian Pharmacist, will outline
simple tips which you can follow in
order to improve your credit and
The basic building block of your credit
system should be your new customer
credit application form ('Form'). One of
these should be completed for every
Examples of these forms may be
downloaded from the Prushka website
(www.prushka.com.au) free of charge.
The documents are in Word format so
that they are simple to amend to suit
your particular circumstances.
Many collection problems occur because
of failure right from the start to obtain
basic credit information, such as the
correct legal entity of the customer
(if your customer is a business). It is
important to know whether or not it
is a company, a trust, a sole trader or a
partnership. Using the Form will ensure
that you obtain the correct information.
If you are extending credit to a company,
it's recommend that you obtain
guarantees from the directors. This is
a simple document but it can be prove
to be a lifeline. If your customer goes
into liquidation and you have directors'
guarantees, your chances of ultimate
recovery will normally be good, whereas
without them they will be dismal.
A suitable directors' guarantee form is
also available on the Prushka website.
If you are extending credit to a family
group, you need to know which
members of the family are to be
included in the account. This is often
an area which can result in ultimate
dispute. If 'Mr Johnson' has completed
a Form that clearly states that his wife
and his three daughters are included in
the account, then he is legally obliged
to pay for the purchases charged up
by them unless and until he terminates
the arrangement. For elderly patients
in special homes, it is wise to obtain
authority from a family member who
will accept personal responsibility for
payment of the account.
Basic credit information which should
be obtained (and which is provided for
in the Form) includes information such
as whether or not the customer owns or
rents his / her house, their occupation
and their workplace. This information
can be exceptionally helpful in the event
of the customer going into default.
A particularly useful piece of information
is to know the name and address of the
previous pharmacy used. If you have any
concerns about the credit worthiness of
a customer, a simple call through to the
previous pharmacy will either set your
mind at rest or set alarm bells ringing.
If you do have concerns about the
customer, check that the address
provided is indeed a real address.
Google the house and the street to get
an idea of what the house may be worth
and call his employer to confirm that
he actually does work there. If you do
have concerns, be wary about running a
credit debit account.
The Form also provides an excellent
place to incorporate your trading terms.
The reason is that if they are clearly
incorporated as part of the Form the
customer signs before opening an
account, then it will be legally very
difficult to then argue that they did not
intend to become bound by those terms.
In the next article (in the May issue),
I will review the basic trading terms
which you should incorporate into your
contract with your customers.
Credit application form:
the foundation for reducing
bad debt risk
By Roger Mendelson
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