Top 5 Reasons to Credit Check New Customers

When you take on new customers, you might be tempted to sign them into a binding contract as soon as possible, and worry about the details later. But remember that once you’re in a contract, you’re bound by it too, and that can make it very difficult to renegotiate things like payment terms later. InRead More

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When you take on new customers, you might be tempted to sign them into a binding contract as soon as possible, and worry about the details later.


But remember that once you’re in a contract, you’re bound by it too, and that can make it very difficult to renegotiate things like payment terms later.

In the worst-case scenarios, you might find you’re contracted to supply thousands of pounds of goods or services to a customer you discover only has hundreds of pounds to pay you with.

Prevention is better than cure – and that’s where credit checks come in. Below are the top 5 reasons why these are important.

1. Bad Debts

Back ground credit checks can help to uncover evidence of substantial outstanding debts owed by the client – a heads-up warning that can prevent you from allowing them to run up a bill when they already owe thousands to other people.

2. Credit History

Even the most solvent of firms might just have poor payment practices and a generally lackadaisical attitude towards financial discipline; their credit history can tell you much more than their publicly filed company accounts or bank balance.

3. Credit Limit

If you do decide to supply the firm, knowing their financial circumstances makes it much easier for you to set a sensible credit limit, so that they cannot run up a bill of more than they can afford, and you can feel more confident of receiving payment on time – and in full – when it is due.

4. Payment Plans

Again, you might decide to be flexible, and if your background check reveals a small but ethical company, you might want to offer them incentives or payment by installments to help them spread out their cash flow more – new start-ups in particular will remember you with gratitude for this kind of gesture.

5. Dodgy Dealings

Perhaps the biggest red flag of them all, if the company owner or director has previously been declared insolvent, or even convicted of professional negligence or fraud, you might want to steer clear; it’s OK to give people a second chance, but you have a duty to protect your own company’s finances too.

If you would like to know more about credit checks or you have any questions please don’t hesitate to get on touch. Phone us on 0808 256 6549.

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