Why You Should Conduct Business Credit Checks On Customers

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Why You Should Conduct Business Credit Checks On
Customers
Source customers/
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ess-credit-checks-on-

• In an ideal world, a business would get paid as
  soon as it delivered goods and services to a
  customer. But this is the real world where credit
  is king, and you have to extend credit
• to the majority of your customers especially
  when dealing with bulk transactions. Although
  offering credit to customers will help you sell
  products, it does put you at risk of delayed
  payments, or even worse, losing money.
• Selling on credit to customers is just like
  lending money to them. Whether you offer 30, 60,
  or 90-day credit, you need some assurance that
  you will get back what is owed to you. But how
  can you tell whether a customer will honour their
  part of the agreement and pay up when the debt
  is due? The answer, business credit checks.
• By conducting business credit checks on new as
  well as existing customers, youll be able to
  get a pretty good idea of how the customer has
  been handling their debts. When you conduct a
  credit check on a customer, the report youll get
  will contain important financial data about the
  client/customer including their debt payment
  history, liens, bankruptcy records, lawsuits and
  court judgements. The report will also include a
  credit score thats an aggregate of all the
  variables.
• Benefits of conducting credit checks on
  customers
• CreditWorks suggests that running credit checks
  on customers before offering them credit
  facilities will benefit your business in the
  following ways
• Maintaining positive cash flow.Having a positive
  cash flow is crucial to any business as it is
  what enables you to finance the day-to-day
  operations. By conducting a credit check on a
  customer before you sell to them on credit terms,
  you can gauge quite accurately whether the
  customer will pay their debt when or before its
  due. This predictability is crucial for
  maintaining a positive cash flow as it enables
  you to plan your business expenditureso that you
  dont run out of cash before more comes in. This
  way your business runs smoothly without cash
  shortages that could be crippling.
• Determining the creditworthiness of a
  customer.When you sell goods or services on
• credit, there is always the risk of not getting
  paid. Since you cant avoid selling on credit,
  the next best thing would be to ensure that the
  risk of bad debts is kept to a minimum. By
  conducting credit checks on new and existing
  customers, you can with a high level of
  accuracy tell the financial health of a
  customer and determine whether theyre capable
  of clearing their debt when its due. A seemingly
  healthy business could be drowning in debt which
  would make them a risky debtor.

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• Avoiding fraud.There is bound to be fraudsters
  trying to make a quick dollar wherever theres
  an opportunity. By credit checking new customers
  before you begin transacting with them, you can
  verify their legitimacy and avoid being conned.
  It takes time to build business credit, and this
  makes it nearly impossible for fraudsters to
  fake.
• Identifying opportunities. Its not all about
  looking for the negatives with credit checks
  they can also be used to identify opportunities
  to grow sales. By credit checking customers, you
  can find out whether they have the capacity to
  take on more debt without running into trouble
  when repaying it. With this information, you can
  tailor incentives
• that encourage low risk customers to buy more
  products from you and thus increasing
• your sales.
• Starting point for long-term relationships. For
  customers that youre contemplating building
  long term relationships with, its important to
  conduct a credit search to determine their
  long-term outlook. After all, you wouldnt want
  to go into business with a company that will
  collapse in a few months time. With the
  information you gather, you can make more
  informed decisions when building relationships
  with customers and implement terms that will
  ensure your business survival is not threatened.
• Selling goods or services on credit is like
  lending out money if banks dont do it blindly,
  why should you? Check your customers business
  credit to protect the future of your
• business.