As a small business it is important to keep in mind that although it is important to have lots of potential customers, it is even more more important that they settle their bills on time. Small businesses rely on prompt payment to ensure that the cash flow within their business remains at a healthy level, if you have bad debtors then it could ultimately lead your business into bankruptcy.
But how can you check if your potential customer is likely to be a bad credit decision? As recent news of large companies going under has shown, the size or age of a company is not a guarentee of a the amount of cash they have avaliable. In fact, it is common for larger companies to delay paying their debts as they feel that their size gives them the power to do so.
You could try approaching the company you are planning on dealing with directly, but this is often impractical, and they may also only share information that casts them in a good light to ensure that the relationship between you is cemented.
As with individuals that are looking for credit with banks, or other organisation, it is often most reliable to check on the financial situation of a company would be to approach a credit checking agency that specialises in company credit checking, checkSURE Ltd are just one of the available online compay credit checking services where you can request a full and comprehensive financial report on a company you are thinking of trading with. This will allow them to give a credit score and suggest a credit limit for you to extend to the company if you choose to do business with them.
If the company you are looking at doing business with is a Limited company, then there is another route available to you. This is to look at the records held by Companies House, the UK company registrar. These records will be able to verify that the company actually exists, and they can also give information on the financial status of the company using the data that is submitted by the company.
Both Companies House and a company credit checking agency will also allow you to check the information of the company directors which is equally important as checking the credit of the company itself as it may be that although the company has a solid financial history, one (or more) of the directors may not have.
Using a company credit checking agency or doing it yourself aren’t the only options available to you. Many business accountants will look into the finances of a potential client if you request it of them, although it may not be covered as part of your “standard” accounts package and attract an additional fee, but they can keep an eye on your finances and alert you to any customers that have fallen behind on their payments. They will also be able to contact any bad debtors on your behalf removing the stress from you and allowing you to concentrate on running your business.
As well as performing company credit checks your potential customers, it is worthwhile getting a credit check on both your company, and yourself periodically too as people you are approaching will be performing credit checks on you and your business and it can help if you know in advance what they are likely to be told and rectify any issues before they cause problems for you.