How to limit the credit risk of new customers

Securing payment from new clients is essential for sound business operations. Whether through borrowing, limiting debtors, or using credit (increasing creditors), maintaining a healthy cash flow should be standard practice. However, not all customers have equal payment records, making it crucial to assess the creditworthiness of new partners or clients before any financial dealings.

Companies, like individuals, have credit ratings generated by complex algorithms based on statistical analyses for credit reports. 

What to include in a credit check:

• Comprehensive company details: Understand the entity you’re dealing with, affecting your approach and potential litigation.
• Details of owners/directors/members: Gain insights into their business history and potential judgments.
• Bank code: Verify banking legitimacy and assess cash flow if possible.
• Trade references: Check payment history and credit handling.
• Details of preferred creditors: Essential for high exposure situations.
• Detailed financial Information: For a comprehensive financial view. If a prospective client is not prepared to give you this information, there typically is a reason.

Go beyond the basics and delve into the company’s judgments, structure and director history. 

Securing professional credit checks:

Use professional services from a credit bureau registered with the National Credit Regulator for comprehensive, accurate, and regulation-compliant reports.

By following these practices, you can proactively manage credit risk and navigate cash emergencies with confidence. Contact The Finance Team today to find out how Part – Time Financial Executives can benefit your business!