In order to help businesspeople protect their work and finances as much as possible, the insurance experts at Toolbox by Admiral have revealed six of the easiest ways to credit check potential customers.
Tradespeople might want to credit check potential customers to ensure they have a history of fulfilling financial obligations and are therefore likely to pay for services provided. This is particularly relevant when the job requires a significant outlay for materials or entails extended payment terms.
A credit check can help tradespeople identify potential risk beforehand and make informed decisions about extending credit or initiating advance payment terms. It also helps them manage their cash flow more effectively, reduces the risk of non-payment, and ensures the sustainability of their business.
From looking at financial statements and references, to using credit report agencies or even asking for upfront payments, there are several easy ways to ensure that you’re protecting your business from customers who may pose a financial risk.
A spokesperson from Toolbox says: “Credit checking customers is crucial for tradespeople to eliminate financial risks and, in turn, protect their business. By assessing a customer’s credit background, tradespeople can make informed decisions about payment terms or even whether they feel comfortable working for the customer.
“By following the below steps, you should be able to check your customers credit history without any hassle.”
The insurance experts at Toolbox have provided six easy ways to credit check your customers:
Utilising a credit report agency
Credit reporting agencies can provide you with detailed credit reports on your customers, available at a cost. These reports will include information on their credit history, including their payment history, outstanding debts, and any bankruptcies or foreclosures they’ve had in the past.
Look at references
One easy way to check a customer’s creditworthiness is to ask for references. This can be especially helpful if you’re working with a new customer and don’t have a lot of information on their credit history. Ask for references from previous suppliers or vendors, and be sure to follow up with those references to get a better understanding of the customer’s payment habits.
Check their business credit score
A business credit score reflects a company’s creditworthiness and payment history, indicating the likelihood of defaulting on payments or going bankrupt. By checking a customer’s business credit score, you can make informed decisions about setting payment terms and negotiating prices.
Look at their financial statements
If you’re working with a large company, you can ask to see a financial statement, which will provide a view of a company’s financial health, including revenue, profit, and debt levels. By reviewing financial statements, you can assess a company’s ability to pay on time and identify any potential risks.
Keep an eye out for late payments
Monitoring a customer’s payment history is a useful tool for employers when credit checking potential customers. If a customer consistently pays bills on time, it’s an indication that they could be a reliable client to work with.
On the other hand, if you find that a customer has a history of missed or late payments, it could be a warning sign that they may not be able to meet their financial obligations.
Build a relationship with the customer
If your customer is a small business who may not be able to provide any of the above information, you may want to ask for immediate payment for the first few invoices to help you gain some evidence about the ability of the customer to pay once given credit. This can also help build trust between you and the customer and allows start-up businesses to prove their credit worthiness.
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