Credit checks are advantageous when deciding which companies to trade with. Credit checks provide you with important financial information as to the company's financial status, therefore allowing you to make an informed decisions.
As most companies choose to extend credit to clients, credit checks should be used as a major part in the decision making process. Knowing the clients' past financial history will give an indicator as to the level of trust you should give to them.
When to use Credit Checks
Many large businesses and companies will extend credit to their clients as they find that it is often easier and faster to do so, having a large number of clients. However if you are a small or medium sized company, this practice can be potentially harmful. The client may delay payment of goods or services; they may not pay at all; or they are not even who they say they are and are making fraudulent transactions. Although larger companies are able to absorb small losses, smaller companies cannot afford to do so. Obtaining credit checks on the potential client will therefore allow you to assess them before making a decision to extend credit. Companies should therefore make it normal practice to obtain credit checks on all potential clients. This practice will reduce the risk of bad debts occuring at a very low cost.
Credit checks should also be obtained on new and potential suppliers. This practice will deter bogus suppliers who may ask for money upfront, and never deliver the goods. You will also know who to contact and where to go if there are any problems with the goods.
In general, credit checks should be used as a reference guide as to the financial status of a company. It also lets you know the legal status of the company and is a good indicator as to the future viability of the company. Credit checks are an aid to minimise the company's risk.
- Obtain credit checks on all potential clients, this will let you see their financial history and also how good they are at paying back credit. It will also help you to set appropriate credit terms and conditions with the client.
- Obtain credit checks when using and switching to new and potential suppliers. This will allow you to verify the exact legal entity that you are dealing with.
- Ongoing credit checks should be carried out on existing clients. This will alert you to any changes with the client that may affect how quickly they can repay their credit. You can then set revised credit terms with them.
- Ongoing credit checks should also be carried out on existing suppliers.
checkSURE Ltd's Online Credit Checks
Credit checks can now be carried out online using checkSURE. Reports are generated online immediately after payment and therefore the costs are cheaper, saving postage, packing and administration costs. There is an added bonus - credit checks from checkSURE are updated daily from Companies House which means that you need not wait for data that may already be out of date when it arrives to you.
There are also many benefits to using checkSURE for your credit checks. Registration is free and everyone receives a personal online portfolio to keep their past company credit checks in. checkSURE also provides a free email alert service which emails you everytime there is a change within your portfolio of companies.
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