Read the supplier financial declaration before signing it

The supplier sends a form to keep credit available

A supplier asks you to sign a declaration about the company's financial position before releasing another order. Read the exact wording and obtain advice. Do not treat it as routine administration merely because the account is longstanding. The business may be under pressure, and a statement intended to keep supply moving still needs to be accurate and properly authorised.

Identify what is being represented

Imagine a director receiving a form that asks about overdue debts and the ability to meet future payments. Preserve the full document and associated terms. Identify the date and entity the statements concern. Do not answer from last year's accounts alone if the question concerns the current position, or assume a declaration about one company applies to an entire group.

Seek qualified help with the financial position

ASIC advises directors to obtain qualified advice when insolvency is suspected. Give the adviser the requested declaration, current cash, creditor information and relevant forecasts. Ask what the facts support and what remains uncertain. Signing a supplier form or mentioning that advice is being sought does not itself resolve the company's ability to take on further debt.

Source: ASIC: What to do if your company is insolvent

Avoid unsupported qualifications

In the example, a handwritten note such as subject to customer payment may not explain or correct an otherwise misleading statement. Ask the lawyer how the request should be answered and whether clarification or a different arrangement is appropriate. Do not assume that adding cautious words permits an assertion that the available evidence cannot support.

Keep new orders under review

Have the proposed purchase and payment terms assessed separately from the form. Existing contractual commitments may also need advice. Do not authorise more credit simply because the supplier has not yet rejected the declaration, or tell staff that completing it means the business has been approved as solvent. Keep the actual decision and instructions clear.

Retain the final communication

Keep the version supplied, its supporting information and the response. Update the adviser if material facts change before further commitments are made. The useful outcome is an accurate, advised response to the supplier's request, rather than a signature obtained under pressure that gives confidence the business's financial position does not justify.