Wednesday, 27 March 2013

Why you should credit check your customers


Why you should Credit check your potential or new customers

If you do not know the credit status of your customer, you increase the risk of being paid late or not at all. Prior to supplying goods or services on credit you should know the financial status of the companies you are doing business with. You should start of by obtaining the following information for the potential or new customer:-

New or Potential customer Company details

In each case you should obtain a signed credit application, which is signed by a proprietor, partner or director of the business (not anyone else). The following basic details should be obtained as part of the application:-

  1. Full Company name and address of the business including registered number (if company is limited). Also including other trading names and addresses.
  2. Full names and residential addresses of sole proprietor or partners. They are personally liable for all debts incurred so the residential address should always be obtained.
  3. The correct legal status of the business e.g. Sole trader, partnership or limited company
  4. Names and addresses of at least 2 trade references.
Obtaining written consent
It is important to obtain written consent from the potential customer to carry out credit checks on their business. This is particually important if you are credit checking sole traders and partnerships at their residential addresses. As part of the data protection act you must have a DP licence and the permission of the subject to carry out the credit searches. Normally this consent is obtained by adding a paragraph in the credit application form that credit checks will be carried out on them.

Perform a Company credit check
A company credit check is taken out on the prospective customer to determine if they are creditworthy. A detailed credit report from a credit reference agency, such as Creditserve Business Information Ltd. Our reports provide comprehensive information, which would allow you to make an informed decision about the customer you intend to do business with.
The credit check can be carried out online therefore allowing you to make an instant decision. The online credit check will provide you with a credit opinion and a risk score, which will indicate the likelihood of the business becoming insolvent within the next 12 months.

Creditserve Business Information Ltd can provide one off online company credit checks on a'pay as you go' basis these reports can be obtained via our Online Shop

Google Author: "By Chris York"

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