Why you should always credit check your customers and suppliers
In any business, it’s crucial that your customers are able to pay you on time. If they don’t, not only will this negatively impact your business but create a ripple effect throughout the chain including your suppliers and whoever they may be working with too.
That’s why before working with anyone and committing to a contract, you should always be sure that they’re in good financial standing, otherwise your business may suffer the consequences.
Why should you know if a business is financially stable?
If your business relies on the services of a supplier that is able to offer you a level of quality and a turnaround time that the competition can’t beat, and they then suddenly go out of business due to financial issues, you’re unexpectedly left without that supplier. You’d have to find an alternative which could firstly take time and would delay certain business operations which could result in loss of customers. They may also not necessarily be the right fit for your business needs.
For this reason, it’s always best to go into any level of business commitment with your eyes wide open. Will this customer be able to pay that invoice on time? Will those suppliers still be available this time next year?
How do you tell if a business is creditworthy?
Your first step should be to perform a check on any potential business partnerships with Companies House. You’ll be checking to see that the business’ registered name matches with its company number.
You’ll also be able to:
- See when the company was registered (a company that’s been around for decades should be more reliable than one that’s only recently registered).
- Tell whether they met the deadline for filing their statutory information (this will show whether they have a good grasp with paperwork and deadlines).
- If there are any current insolvency proceedings against them (this should be considered as a massive red flag).
Looking for financial advice?
If you’re looking for sound financial advice, you should always seek assistance from a chartered accountant. Here at Clear Vision, based in Romsey, near Southampton in Hampshire, we pride ourselves on our ethos of prioritising a customer focus, honesty, clear communication and personal service. We have a broad portfolio of business and individual clients spread across a range of sectors and industries, so have the in-house expertise to address all aspects of a client’s financial affairs. If you’d like more information or need support with your cashflow and credit checks, contact our friendly team on 01794 330025, email email@example.com or visit www.cv-fm.com.