In 2015, our research shows that more invoices were paid late than on time, meaning that businesses all over the UK were dealing with late payments on a regular basis. Light has been shone on late payments throughout recent years and credit checking has become a safe guard for combatting the problem and helping B2B businesses avoid bad debt. After all, if your company is paid late, the knock on effect could result in you paying your own bills late.
The cycle is vicious and a very real concern, one big customer paying you late or not at all could seriously damage your cashflow and your business. Not all companies pay late, so don’t lose hope. The key is to deal with the right companies who are creditworthy enough to pay you on time, or at least to understand their payment behaviour and respond accordingly.
Here’s how credit checking can aid your decisions.
Creditsafe has over 90 million payment experiences in the UK alone for companies of all sizes, allowing all our trade payment data to be accurate, real time information from real companies; not just figures and facts based on the bigger corporations.
When taking on new B2B customers it is vital to find out how they pay their bills. The view of ‘any business is good business’ has taken a back seat when late payments swept the nation, therefore doing your due diligence could possibly save your company from becoming damaged from unpaid bills or bad debt. It is better to have fewer customers who can actually pay you than a wide portfolio of unpredictable clients. Our research revealed that invoices under £5,000 are paid the latest, which is bad news if you’re an SME.
A Creditsafe credit report on a limited company can show you how many days a customer takes to pay their bills based on real life experiences of their suppliers, it can even show you if they are getting better or worse at paying. You can find out how many invoices were paid within terms, 0-30 days, 31-60 days, 61-90 days and 91 days plus; you can also see how many invoices are left outstanding for that company to pay.
Credit limits and rating
Creditsafe also offer a credit rating for each company on our system. The Creditsafe rating model tells you how likely a company is to fail in the next twelve months, banding companies from high to low risk. If a customer you are thinking of a signing a contract with is deemed as high risk, the key financials tab will allow you to look further into their finances. The information is there to aid your decisions of taking a company on board. Remember, this company will impact your business if they fail to pay you, so be vigilant in your due diligence.
If you are unsure if your potential customer could pay you for the services you are offering we also provide a suggested credit and contract limit on a company’s credit report. This is the amount we suggest the company to be invoiced at one given time or over a contracted time of 12 months. It’s worth checking this to make sure you aren’t invoicing an amount that they won’t be able to pay.
Monitoring existing customers
Monitoring is an important factor of business that many people overlook. It is worth noting that businesses aged between 3-10 years had the highest insolvency rate in 2015, cancelling out any stereotypes of start-ups being the weaker bracket of businesses. It goes to show how important monitoring is for your company. Even if you are doing your due diligence and you had credit checked a company before going into business with them, their circumstances could quickly change. One bad payer could rumble the company, having a knock on effect on how they pay their bills or worse, make them become insolvent. By putting your entire customer base into our Risk Tracker, you are able to monitor your customers effortlessly on a daily basis. If anything changes on their company credit report you will be notified by email. Spotting the warning signs of a failing company is vital to protect your own business. Once a company becomes insolvent it is often difficult to get money that is owed to you, so always be vigilant and monitor your customer base.