8.4.2 Refusing credit

When refusing credit facilities, the writer must explain why he is turning the request down. There may be a number of reasons for this. It might be uneconomical for him to offer credit facilities; he may not trust the customer, i.e. the customer has a bad reputation for settling accounts; or it might just be a policy of his company not to give credit. Whatever the reason, the reply must be worded carefully so as not to offend the customer.

Thank you for your letter of 9 November in which you asked to be put on open account terms. Unfortunately, we never allow credit facilities to customers until they have traded with us for over a year. We really are sorry that we cannot be more helpful in this case.

We regret that we are unable to offer open account terms to customers as our products are competitively priced and with small profit margins it is uneconomical to allow credit facilities.

We are sorry that we cannot offer credit facilities of any kind at present owing to rising inflation. However, perhaps if things settle in future we may be able to reconsider your request.

We have considered your request for quarterly settlements, but feel that, with our competitive pricing policy which /eaves only small profit margins, it would be uneconomical to allow credit on your present purchases. However, if you can offer the usual references and increase your purchases by at least fifty per cent perhaps we can reconsider the situation.

8.4.3 Negotiating

Sometimes a supplier will not offer as much credit as the customer wants but will negotiate a compromise.

I regret that we cannot offer you credit for as long as three months, since this would be uneconomical for us. However, I am prepared to offer you settlement against monthly statements. Perhaps you will let me know if this would be acceptable.

Though we do not usually offer credit facilities, we would be prepared to consider partial credit. In this case you would pay half your invoices on a cash basis, and the rest by 30-day bill of exchange. If this arrangement suits you, please contact us.

8.4.4

Reply while waiting for references

In some cases you will not be able to grant credit without making further investigations. In particular, you may want to take up the references your customer has offered. In these cases, your reply will be little more than an acknowledgement of the request.

Thank you for your letter in which you asked for credit facilities. At present we are writing to the referees you mentioned and will let you know as soon as we hear from them.

In reply to your letter of 8 June, we will consider your request to pay by 30-day bill of exchange and will contact you as soon as we have reached a decision. I received your letter of 15 March, yesterday, in which you asked for open account facilities. As soon as the usual enquiries have been made, I will contact you.

As we have only just received your letter asking for credit facilities, please would you allow us a little time to consider the matter? We will be answering you within the next couple of weeks.

R. Hughes & Son Ltd.