In the business world, extending credit to clients can be a strategic move to foster growth and build client relationships. However, it’s vital to approach this with caution and proper planning. As an accountant advising business owners, I emphasize the importance of understanding the mechanisms like the Personal Property Securities Register (PPSR) and setting clear terms of trade. Here’s how you can offer credit to business clients while protecting your interests.

1. Assessing Creditworthiness
  • Credit Checks: Conduct thorough credit checks on potential clients to assess their financial stability and credit history. This can help you determine the level of risk associated with extending credit.
  • Financial Analysis: Review the client’s financial statements and payment history to gauge their ability to fulfill payment obligations.
2. Setting Clear Terms of Trade
  • Written Agreement: Establish clear terms of trade with your clients. This should be in the form of a written agreement, detailing payment terms, due dates, interest on late payments, and consequences of non-payment.
  • Transparency: Ensure that your terms are transparent and understood by the client. Clarity in terms of trade can prevent misunderstandings and disputes.
3. Using the Personal Property Securities Register (PPSR)
  • Understanding PPSR: The PPSR is a national online register in Australia where you can register your security interest in the goods you supply or personal property that you lease to protect your interest in case the client defaults or goes bankrupt.
  • Registering Interest: If you offer goods on credit, registering your interest on the PPSR can help you reclaim your goods or their value if the client defaults.
4. Credit Limits and Terms
  • Establish Credit Limits: Set credit limits for each client based on their creditworthiness and your business’s risk tolerance.
  • Flexible Terms: Consider offering flexible payment terms tailored to each client’s situation, but ensure these are within your business’s capacity to manage.
5. Monitoring and Follow-up
  • Regular Review: Monitor the client’s credit account regularly. Keep an eye on payment patterns and outstanding balances.
  • Proactive Follow-up: Be proactive in following up on overdue accounts. Prompt communication can often resolve late payment issues quickly.
6. Legal Compliance and Documentation
  • Legal Advice: Seek legal advice to ensure your credit practices and terms of trade are compliant with Australian laws, including consumer credit laws and fair trading regulations.
  • Documentation: Keep comprehensive records of all credit transactions, agreements, and communications with clients.
7. Managing Risks
  • Insurance: Consider obtaining trade credit insurance to mitigate the risk of non-payment.
  • Diversification: Diversify your client base to reduce reliance on a few clients for revenue.
8. Seeking Professional Guidance
  • Accountant’s Role: Consult with an accountant to understand the financial impact of offering credit and to set up appropriate accounting practices for managing credit.
  • Regular Review: Regularly review your credit policies and procedures with professional advisors to ensure they remain effective and relevant.


Offering credit to business clients can be a beneficial strategy, but it requires careful management and a clear understanding of associated risks. By assessing creditworthiness, setting clear terms of trade, using tools like the PPSR, and staying compliant with legal requirements, you can extend credit more securely. Remember, regular monitoring and professional advice are key to maintaining a healthy credit system in your business.