The Importance of Credit Checking Customers
Many times, when there is potential for a sale, businesses will jump at the chance for more work and forget about one of the most important factors in a business, when all of your work has been completed, will you actually get paid?
Carrying out a credit check on potential customers prior to doing business with them is essential in my books, as this will highlight any red flags that could indicate your potential customer’s inability to pay you. If a credit check brings up that your customer has CCJs against them, for example, this strongly indicates that they have not paid a past supplier, and should encourage you to seriously consider whether the risk of doing business with that particular customer is worth it.
Credit checking customers will provide:
- A strong indication of whether or not a business has the ability to pay you for the work you carry out
- Information on their current and past credit history, therefore you can discover if other companies have had issues in receiving payment
- Checking their potential to pay before beginning legal action against them for unpaid invoices – if they have a number of CCJs against them, they file their accounts late or their accounts highlight poor performance, then it is unlikely that even if you win judgment you will receive payment.
If a credit check, or continual monitoring does indeed bring up anything worrying it may be worthwhile to ring your customer (especially when accounts are filed late) to find out why and to explain your cautious stance when it comes to doing business with them.
Whilst a credit check is not a guarantee you will be paid on time, it should form part of the ‘jigsaw’ of your credit risk assessment before trading with a new company.
Our support service provides you with credit checks of your customers, ongoing monitoring, as well as unlimited email and telephone advice, for a very low cost; contact us for more information.
