Every customer deserves credit checking
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Photo Credit: Stuck in Customs via Compfight cc

 

Credit checking every customer can feel like a chore – we understand that, as it’s a substantial part of our full-time occupation!

 

But there are good reasons why you should make sure that you credit check every single customer before allowing them to place an order.

 

Imagine you were stood in the street, and a stranger came up to you and asked to borrow £100; would you give it to them?

 

Probably not, unless you knew them and knew you could trust them to pay it back. So why would you say yes to a stranger, just because you’re a business?

 

When you allow a customer to run up a bill without upfront payment, you’re effectively lending them your money, in the form of your goods and services.

 

Unless you credit check them, you have no way of knowing whether you can trust them to pay – and it doesn’t matter if they’re big or small.

 

  • Big customers represent significant individual risks, and credit checking each of them can help you to avoid extending substantial lines of credit that will not be paid back.
  • Smaller customers represent a significant aggregate risk, and only by credit checking all of them can you be confident that your company‘s total risk exposure is acceptable.

 

You might think it’s best to have a tiered approach to credit control, where you only credit check companies you think might be a credit risk.

 

But that’s a paradoxical approach, as it’s only by credit checking them that you identify which represent the greatest risk to your company – you shouldn’t be guessing which are risky, and then only credit checking those.

 

Finally, by adopting a holistic approach to credit control, you gain the greatest possible understanding of your overall risk profile, allowing you to manage your liabilities in an informed manner – and this puts the control of your cash flow firmly in your own hands.

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