17/11/2014
By Ade Potts, Managing Director, SME Business, Experian
The success and reputation of your company is dependent on who you choose to do business with. Ask yourself, “How well do I know my customers and suppliers? What checks have I put in place to ensure my customers can pay for my services, and can my suppliers deliver their services to me?”. If you’re not establishing the financial integrity of the companies you are in business with, you could be putting yourself at risk of cash-flow problems and insolvency.
It is critical to safeguard your company from rogue businesses, so here are some tips on how to protect your financial reputation.
1) Run a status check when taking on new customers and suppliers
Four out of ten registered businesses never go on to trade at all, so make sure you are dealing with a real business. Use tools like Google Street View to confirm the address and building the company is trading at; call the phone number that is registered to the company; and even ask for a reference from another company to ensure the business is real, and pays its bills.
2) Run a credit check on any potential customer, supplier or partner
Only a third (34%) of SMEs run a credit check on new business customers, and under a half (45%) run a credit check on new suppliers. Yet according to Experian data, invoices are getting paid more than three weeks later than agreed invoice terms. To avoid potential financial exposure, check out a company’s commercial credit score, their credit status, trading history, and their ability to pay bills on time.
3) Monitor who you are in business with
A company’s financial circumstances can change; just because a customer or supplier has previously proven themselves reliable by paying or delivering on time, don’t rely on this for the future. Keep monitoring your existing customers’ and suppliers’ credit performance, so you can mitigate any challenges before they become an uncontrollable issue.
4) Don’t treat operating abroad like a holiday
When trading internationally, put the same checks in place as you would in your home country. Set up access to an international credit report, learn about a company’s credit history, and set appropriate payment terms and credit limits.
5) Write credit checking into your business blueprint
Code Print, a small print-management and promotional-gift business treats credit checking like a form of business insurance. From the company’s first day of trading it has used credit checking as an essential part of its ‘tool kit’. “SMEs cannot afford to waste time doing quotes for people who in the long run will delay or never even pay for the work that is done. Suppliers are a key element of our business and knowing if one of them could go ‘pop’ at any moment means that you can safeguard your business and manage customer expectations quickly,” commented Phil Simpson, Managing Director, Code Print.
