Company credit checking is rapidly becoming the norm in business today. Although the economy is recovering from a recession, uncertainty still lies ahead with the announcement of Brexit and the effect it will have on the macro economy. Keeping your business safe has now become more important than ever, and company credit checking can aid you with this. However, there are still companies out there who feel that they don’t need to credit check their customers and suppliers. It may be down to not knowing enough information about credit checking, not being able to afford it as they are a start-up or they are even a start-up that hasn’t been stung by a late payment yet and could be ignorant to due diligence. There are reasons for everything and every business is different, here are the top 5 reasons we have come across for not credit checking.
- My customers are too big to fail
‘I deal with high end customers who have millions of customers themselves. They are too big to fail, they are very high profile and have a team of people making sure the business runs smoothly and looking after the financials.’
This is an explanation we hear a lot at Creditsafe when we speak to potential new customers. No business is too big to fail. Remember Woolworths? BHS? Kodak? Just to name a few… Every company has a chance of failing, no company is 100% secure. Another crucial factor about dealing with a big company is that they are more likely to have a Group Structure. There could be parent or sister companies associated with the large company you deal with and they could be struggling. If the parent company is struggling, this could eventually affect your customer. Wouldn’t you want to see the full picture?
- They have always paid me on time in the past
Lots of people base trust on first impressions and personal experiences, so if a company has always paid you on time in the past, why not trust them to continue to do so? Credit checking isn’t about distrusting a company, it’s about safeguarding your own. If you run a company that you have built from the ground up or if you don’t have a cash reserve, credit checking is even more important as one non-payment from a big customer can completely tarnish your cashflow and leave your business struggling. Every business has ups and downs, and if a business starts to struggle one of the first things that could falter is the time is takes them to pay their bills. Our company credit reports show a company’s payment trend and if they are getting better or worse at paying bills; you can see for yourself if and when you need to adjust your payment terms to ensure payment from your customer.
- The director seems experienced and well presented
‘I met the director before we signed the contract, he is experienced and has great business acumen. He told me about all the other successful companies he has created and managed.’
As bad as this sounds, you can’t trust everyone. Some directors could be truthful to you about their past, but others may be hiding a string of failed companies behind them. If a director you’re dealing with has a habit of being involved with companies that fail, wouldn’t you like to know? Our director reports can show you a director’s past and present appointments, as well as information on those companies.
- I credit checked them once, why would I do it again?
‘I always run company credit reports on new business before we sign contracts, why would I need to do it again?’
The myth that credit checking a company once is finally starting to diminish. With the business world moving at quicker speeds than ever before, circumstances could quickly change within any company; big or small. A business that was creditworthy 6 months ago may not be creditworthy now, that’s why we always advise monitoring your customers and suppliers. Creditsafe’s Risk Tracker monitors your customer base automatically, and alerts you of any changes on their company credit report so you can act quickly if you need to.
- If they don’t pay, I can just take them to court
‘It doesn’t bother me if a customer doesn’t pay me, I will get my money by taking them to court.’
This could be one of the worst possible ways of thinking as a business owner. Taking a customer to court over an unpaid invoice is both time consuming and very expensive. Using a debt recovery agency that works on a ‘no win, no fee’ basis can also end up costly. If the agency win your case, you need to pay the fee; and if they lose, you lose the money you are owed. It’s the same with taking a company to court. It could take weeks, if not months to get your case to a hearing, all whilst the solicitor bills are piling up and you still couldn’t receive the money owed to you. In this case, prevention is better than a cure. Wouldn’t you like the hassle of not having to chase unpaid invoices? If you credit checked all your customer base you can be confident when your customers are going to pay you, and not go through the hassle of taking them to court.
Do you have any other reasons you have heard for not credit checking? Let us know in the comments below!