Checks to run before extending payment terms

Offering payment terms is lending. You are handing over goods or work today against a promise of money in 30 days, unsecured, usually without interest. Framed that way, the amount of diligence most suppliers do before saying yes looks thin.

This is the checklist for that decision — what to gather, how to turn it into a number, and what to put in writing.

Before you say yes

Get a completed credit application

Not an email. A form that captures the registered legal name and NZBN, the trading name if different, the physical and postal addresses, the accounts-payable contact, the terms requested, the limit requested, and trade references. If a prospective customer will not complete a credit application, you have learned something useful for free.

Verify the entity yourself

Check the NZBN they gave you against the register rather than trusting the form. Confirm the company is currently registered and that the person signing has authority to bind it. Every downstream remedy you might need — a default, a guarantee, a statutory demand — depends on having named the right entity at the start.

Check payment behaviour, not just adverse events

A clean file is the normal state of affairs, including for companies that pay everyone 60 days late. Look at how the company actually settles invoices and, more importantly, which way that number has been moving. See what a credit check actually shows for how to read it.

Decide whether you need a personal guarantee

For a young company, a thinly capitalised one, or an exposure large enough to hurt, a director’s personal guarantee changes the calculus considerably. Ask early — it is a normal commercial request and far easier to raise before terms are agreed than after the first overdue invoice.

Setting the limit

The most common mistake is setting a limit based on what the customer asked for. Two better anchors:

• What you can afford to lose. If this customer never paid, would it be an annoyance, a bad quarter, or an existential problem? Do not let any single customer reach the third category
• What the relationship justifies. Start low. A limit is not a verdict on someone’s character; it is an opening position that grows as they demonstrate they pay

Staging works well: a modest limit on shorter terms for the first quarter, reviewed on actual payment performance rather than on volume. Plenty of suppliers raise limits because a customer is buying more, which is precisely backwards.

Put it in writing

Whatever you decide, the record needs to show:

• The exact legal entity and NZBN the account belongs to
• The credit limit and the payment terms
• Your terms of trade, and evidence they were accepted
• Any guarantee, signed, with the guarantor identified
• What the decision was based on, and the date
• A review date

That last line is the one most often missed. A credit decision made two years ago against a company that has since doubled its days-late is not a decision anyone would make today.

After the account is open

Invoice promptly — you cannot complain about slow payment on an invoice you sent late. Chase on a schedule rather than on irritation. Watch for the early signals: part payments, disputed line items raised only after the due date, a new contact who does not know the history. And review the limit when payment behaviour moves, not annually out of habit.

If an invoice does go genuinely unpaid, PaidWell lets you register a payment default after 14 days’ written notice to the company, with a structured dispute process attached. That notice period is not optional friction — it is what keeps the register accurate and fair to companies that have a legitimate dispute.

For the full check sequence, see how to credit check an NZ company.

A note on what this is not

This is general information, not legal or credit advice, and PaidWell is an information service rather than a credit bureau. Terms of trade and guarantees have real legal consequences — have yours reviewed by a lawyer.