Winning a new customer is usually good news. They might place a decent-sized order, agree to ongoing work or look like they could become a valuable client for years to come. Understandably, most business owners are thinking about the opportunity rather than whether they’ll eventually get paid.<\/p>\n
But if you’re going to provide goods or services before receiving payment, you’re effectively giving that customer credit.<\/p>\n
That’s where a business credit check can be useful.<\/p>\n
Credit checking doesn’t need to become a major exercise every time someone places an order.<\/p>\n
It’s more about knowing when the risk justifies taking a closer look.<\/p>\n
A new customer asking for 30 or 60 days to pay is an obvious example. The same goes for an unusually large order or an existing customer asking for a higher credit limit.<\/p>\n
Before agreeing, it’s worth knowing a little more about the company you’re trusting with your money.<\/p>\n
A credit report can highlight things such as previous County Court Judgments (CCJs), financial information, credit limits and other signs that a business may have struggled with its finances in the past.<\/p>\n
It doesn’t necessarily mean you shouldn’t work with them. It just gives you more information before deciding how much credit you’re comfortable offering.<\/p>\n
It’s easy to think credit checks are only for new customers.<\/p>\n
A company you’ve dealt with happily for five years can find itself in financial difficulty just as easily as one you’ve never worked with before.<\/p>\n
Often, the first clue is a change in behaviour.<\/p>\n
An invoice that would normally be settled on time arrives a week late. The next one takes longer. Perhaps part-payments start appearing or someone who always answered the phone suddenly becomes difficult to reach.<\/p>\n
There could be a perfectly reasonable explanation. But it’s also a sensible point to check whether anything has changed.<\/p>\n
One situation that can catch SMEs out is a customer suddenly placing a much larger order.<\/p>\n
Turning it down might feel like madness. After all, growing sales is what most businesses are trying to do.<\/p>\n
The trouble comes if you normally supply \u00a32,000 worth of goods to a customer and suddenly agree to \u00a320,000 on the same payment terms. Your exposure has changed considerably, even though the customer hasn’t.<\/p>\n
Taking another look at their financial position before saying yes can help you decide whether the existing terms still make sense.<\/p>\n
Suppliers are worth thinking about too.<\/p>\n
If your business relies heavily on another company to supply stock, materials or an important service, their financial problems can quickly become yours.<\/p>\n
A key supplier suddenly disappearing could leave orders unfinished and customers waiting. That’s particularly important where you’ve become dependent on one business to keep things moving.<\/p>\n
Credit management isn’t only about who owes you money. It’s also about understanding where financial problems elsewhere could affect your own business.<\/p>\n
At Churchill Recovery Solutions, we’re normally involved further down the line, once an invoice hasn’t been paid and the usual reminders have stopped getting anywhere.<\/p>\n
By that stage, circumstances can look very different from when the work was first agreed.<\/p>\n
That’s why good credit management starts much earlier than debt recovery. Checking who you’re dealing with, setting sensible limits and paying attention when behaviour changes won’t prevent every bad debt.<\/p>\n
It can, however, help you spot the ones that perhaps shouldn’t have been allowed to grow quite so large in the first place.<\/p>\n
Sometimes ten minutes spent checking a customer at the beginning can save weeks spent chasing them at the other end.<\/p>\n","protected":false},"excerpt":{"rendered":"
Winning a new customer is usually good news. They might place a decent-sized order, agree to ongoing work or look like they could become a valuable client for years to come. Understandably, most business owners are thinking about the opportunity rather than whether they’ll eventually get paid. But if you’re going to provide goods or […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23,59,1],"tags":[],"class_list":["post-741","post","type-post","status-publish","format-standard","hentry","category-small-businesses","category-smes","category-uncategorised"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t