Credit Control

1. Checking for Credit

Is a customer likely to go out of business, leaving you unpaid? Will a customer delay payments, wasting your time as you chase the money? Checking references lets customers know you are serious about credit control.

1.1 You can now get online credit ratings fast enough to use them as a basis for real-time business decisions.

• This can cost as little as £10 to £20.
• Even a highly detailed payment and credit report will not cost more than £50.
• These ratings can be obtained from credit reference agencies, or through similar services offered by some business support organisations.

1.2 Ask customers to give you names of suppliers you ask for trade references.

Beware of being fed tame suppliers that the customer knows will provide good references.

Ask the referees:

• To confirm your potential customer's trading name and address.
• How long they have dealt with them.
• What credit period they give the customer and whether they get paid on time.
• What credit limit the customer has and how much is currently outstanding.
• Whether they are in any way associated with the customer, other than as an arm's-length trade supplier.

1.3 Another way to check creditworthiness is to apply, with a customer's written permission, for a reference from his or her bank (costing about £20 to £25).

• The response will take time and you will need to know how to interpret it, so this may not always be the best option.
• Tell the bank exactly what credit you plan to offer (eg £500 limit, payable monthly).
• Ask if the bank knows of any outstanding writs (demands for payment made through a court).