Are you doing enough to credit check your customers?
Wednesday, 6th November 2019 11:33

Offering credit terms to customers is a solid strategy for building business relationships and increasing sales, but with 62% of SMEs reporting that they are struggling with late payments, it’s vital that companies are proactive in making sure that they have a clear understanding of their customer’s ability to pay invoices before setting out terms and conditions.

By building a credit checking function into your account opening process (or even when first engaging with a potential client to avoid tendering or pitching for work that realistically won’t ever get paid for) will give you an insight into a customer’s ability to settle invoices on time. A robust credit checking process will highlight any potential risks long before they actually affect your cash flow when they can be harder to recover from.

We look at the many options available that enables a business to protect itself from late or non-payment:

Buying a Credit Report

A credit report is the most common way of checking a business’s creditworthiness and get an insight into its financial stability. A report should include basic information about the company, such as their registered address, any parent companies and key contacts within that business. The report will also give you detailed information regarding bank accounts and any credit cards. This report will show details of when accounts were opened, payment history and any outstanding amounts. The report will also include a credit score, which will enable you to make an informed decision on how you proceed. All credit report providers have their own way of calculating this so expect a little variation. Credit reports do have a cost associated with them and are often ‘capped usage’ – you may pay a subscription and then get a limited number of reports included. Be mindful – a little like a lease car – if you go over the limit you will be charged.

Online Business Data Portals

identeco’s Business Support Toolkit provides uncapped access to financial insights on over 6m UK companies and businesses. Subscribers can view a real-time financial health rating based on traffic light system, access details of trading behaviour and any days sales outstanding, the average time a company takes to settle its invoices, as well as a suggested credit amount. Unlimited searches and checks are available for an annual fee of £79.95 per year – there are no further charges. The reports are instant and there are lots of other services included in the £79.95 making it a cost-effective and reliable option for carrying out risk checks.

Sign up here or enquire about a free trial.

Secure References

When working with a new client, request references from their existing suppliers. This will help to give you a clear picture of how they work and what behaviour you can expect when it comes to paying invoices. You can also request a bank reference that should flag any issues.


A little bit of research can go a long way in getting some transparency of a company’s finances and trading habits. There are several resources enabling you to gain more insight into a business’s trading practices such as The Prompt Payment Code, which sets out best practice principles and is administered by the Chartered Institute of Credit Management. Companies who sign up to the Code commit to paying 95% of all supplier invoices within a 60-day period.

If a company that you are looking to work with is on the Code, it’s a pretty good indicator that they execute good practice when it comes to paying bills. But don’t just rely on this – there has been a spate of businesses that fail to meet the criteria and some high-profile removals from the Code.

Another great resource is the new government legislation that requires the largest companies in the UK to publicly report their payment practices twice a year. This lets you see how the big players are treating their suppliers and if they are paying their invoices on time.

If you find that, despite having a credit checking process, you are still experiencing late payment - we can help. Click here for more information.