The finance department of a business has a wide range of responsibilities that include basic bookkeeping, evaluating company performance through profit and loss, liquidity through the balance sheet and closely monitoring company cash flow, in order to maintain creditworthiness and business survival.
Credit checking is a crucial aspect of ensuring cash flow and both a company’s short term and long term viability. If a customer doesn’t pay you on time, or worse not pay you at all, your cash flow will suffer and cause you to either use other monetary avenues – potentially through liquidation of assets – to make up the loss or be unable to pay your debts and outgoings.
There are countless examples of companies who were thought of as financially stable, including stalwarts of British business, have collapsed and gone bust. Woolworths, Comet, Blockbuster, MG Rover, Kodak are or were well known brands that have entered administration, liquidation or filed for bankruptcy over recent years.
It could be seen that if these powerful, well known companies can go bankrupt leaving their suppliers in limbo, despite their famous brand identities and buying power, how much more threatening and uncertain is the marketplace for smaller companies? This outlines how important it is for not only your sales team but also your finance team to understand and know your customer; whether they can pay you – irrespective of size – and what impact this will have or has had on your business from a financial perspective.
Credit checking your customers is the way to do this.
Research has found that in 2014, British businesses were owed more than £12 billion in outstanding debt. That’s £12 billion that hasn’t circulated into the UK economy, but has created labour and products that have yet to be paid for, and that a finance team somewhere continues to chase payment for or has resorted to legal action to obtain
This level of uncertainty means a continued issue for businesses, and many sleepless nights for their owners, directors and managers. However, this is where business information providers, like Creditsafe, can give businesses access to data to help them gain a better insight into their customers and ensure that they can make informed business decisions when it comes to offering or extending credit and negotiating payment terms. Not only is it important to use credit checking intelligence data, but the accuracy of the data ensures that you are reviewing quality information on those specific companies, and are able to avoid dealing with untrustworthy businesses because of flaws in the data you have been provided.
Here are Creditsafe, we provide high quality company information, through company credit reports, to help your business avoid these problems and allow your finance team to identify and avoid non-creditworthy customers, as well as reduce the exposure to risk by managing provisions and working capital effectively and intuitively. Creditsafe is the most used provider of business information in Europe and has the most predictive scoring model in the industry, ensuring the data you receive and use is correct, as well as up to date so your finance teams can make simply smarter decisions.