When you take on a new client, credit checks help you to know if they are an unacceptable financial risk to your firm – but what about when your company has only just begun trading, and all of your clients are new?
You might be tempted to put credit checking on hold for the first few months, ‘until we get established’, but doing so could leave your fledgling firm open to risks that it is not yet capable of coping with.
Instead, make credit checks even more of a priority in your early days, and you can increase your likelihood of still being in business after your first year.
According to figures from financial data start-up Ormsby Street, small businesses that perform regular credit checking from day one are as much as 30% more likely to survive their first 12 months.
Managing director Martin Campbell said: “[Credit checking] helps a small business establish a good credit rating and also addresses the issue of late invoice payment by providing insight on whether customers are likely to be good payers or not.”
And of course, if you make good credit control practices a cornerstone of your trading style from the outset, you’re well placed to minimise your financial risk in the future too.
That means continuing to perform credit background checks on future customers, adjusting their credit limits to appropriate levels, and keeping a close eye on invoices to avoid allowing them to go unpaid and overdue.
It’s all part of the same joined-up process, which ultimately keeps the money you are owed coming into your accounts more regularly, so you are in the best possible position to withstand any unexpected market shocks, and to deal with the debtors who still go overdue.