If your business offers credit, you must make sure customers have a good credit history, as this will increase the chances they will pay you on time, every time. You could save yourself a lot of time and worry in the future by researching them at the start of your working relationship.
Ways you can check a new customer’s credit history include:
- Information – Collect the right contact information from the start, including a named person in accounts, where possible.
- Research - Investigate the potential customer; visit their premises; meet their people and get a feel for how they do business. The internet enables you to quickly and easily research what others say about them.
- Contact your potential customer’s other suppliers – Ask them about their experiences – crucially, whether there have been any serious issues regarding payment.
- Bank credit checks – Some banks will carry out business credit checks for you for a small charge.
- Checking software – There are various specialist software tools on the market that enable you to run credit checks on new business clients before entering into a contract with them.
- Use specialist websites – You can check a business’s credit history online by using websites such as UKData.com
If you really want to do business with a new customer but your research makes you less inclined to grant credit, you can request advance payment.
Anita Brook is a chartered accountant and owner of accountancy firm Accounts Assist. She also helps businesses regain control of their cash flow with Debts Assist and helps entrepreneurs launch their own bookkeeping businesses with Brilliant at Bookkeeping.