3 steps to determining a customer’s creditworthiness
If you supply customers with a product or service, then offering a credit facility is a great selling point, but it doesn’t come without its risks.
Whilst it is impossible to completely safeguard yourself from non-paying customers, it pays to have a system in place for checking a company’s credentials before you commit to working with them.
Essentially, what you need to know is can this customer afford to pay and will they be reliable.
Doing your research and checking a company out before making an agreement can help to mitigate unnecessary risk and save you a headache and financial loss further down the line.
Here are a few simple steps we recommend you take to check out the creditworthiness of your next new customer.
References
Speaking with other suppliers that the customer works with is a great way to get a feel for what they’re like to work with. Ask questions to find out whether they pay the full amount on time and if they have faced any problems with them in the past.
Don’t forget, it’s not just other suppliers that can provide you with insight into the customer, bank references can also be enlightening.
Credit report
Whilst credit reports do cost money, they are worth their weight in gold if they save you the time and expense of dealing with a nightmare customer. There are plenty of professional credit reporting companies to choose from, including Experian, TransUnion, and Dun and Bradstreet. Getting a credit report on a company is a convenient and reliable way of finding out everything you need to know about a customer’s credit history, including payment trend history, CCJs, and time to payment.
Companies House
You can also visit the Companies House website to view free information about a business. Useful information includes, when the company was registered, whether they met their deadline for filing statutory information, the company’s publicly available accounts, and details about any current insolvency proceedings against them.
For help with developing a system to avoid collection issues, speak to us about our credit management service.