Minimum First Order Without Credit Investigation

Many credit departments and small businesses don't have the time and resources needed to perform a credit investigation on every new account. Therefore, some companies establish a limit up to which initial orders placed can be automatically shipped without any investigation - or with minimal investigation on the part of the credit department. While this practice clearly involves some risk, some companies consider the risk to be acceptable. In other words, in a cost-benefit analysis the cost of evaluating each new account is believed to be greater than the benefits of doing so - particularly when the customer in question has placed a relatively small opening order.

Edited by Michael Dennis, author of "Credit and Collection Handbook" available at the NACM Bookstore.