Credit Searches – Know Who You Are Trading With
Carrying out a Credit Search on a potential customer is imperative. Companies that have been placed on stop with one supplier will often seek supply elsewhere. Some unscrupulous companies and individuals have no intention of paying for your goods or services from day one. Therefore, unless you are certain that your potential customer is a household name or a large Government organisation, you should always carry out some form of credit check before offering credit facilities.
Once you have received back your completed Account Application Form (see Blog 2) and depending on the level of credit being requested, you have the following options available:
Companies House
Companies House offers a free online search facility which allows you to access information on any Limited Company.
Checking Companies House tells you the Company’s legal name, incorporation date, director details, registered office address and whether the statutory accounts and confirmation statements are up to date.
Whilst the accounts filed at Companies House can provide a useful insight into a Company’s financial position, many business owners find them difficult to interpret. Understanding a balance sheet often requires a degree of accounting knowledge. Furthermore, the accounts available may already be over a year old and may not accurately reflect the Company’s current financial position.
The Internet
Search Google and other search engines. Does the Company have a website? Have a look around review and rating sites. Search in general and see what information you can find.
A simple internet search can often reveal useful information about a company’s reputation, trading history, customer feedback, recent news, legal disputes, insolvency issues or other matters that may influence your credit decision.
Credit Checking Companies
Credit reference agencies such as Creditsafe and Experian can, for a fee, supply detailed Company Credit Reports.
These reports contain much of the information available from Companies House but are presented in a format that is generally easier to understand. They often include several years of financial comparisons, a credit opinion, suggested credit limit, and adverse information such as County Court Judgments (CCJs) that may not be readily available from other sources.
Reports can also be obtained on sole traders, partnerships and individuals, although additional data protection requirements may apply.
Trade References
Trade references can be obtained from existing suppliers. These references are of limited value because it is unlikely that a potential customer will provide details of a supplier who is likely to give a negative reference.
However, the more information you request, the stronger the message you send to your prospective customer that proper credit checks are being carried out.
Your Account Application Form is a Debt Prevention Tool
An Account Application Form is itself a debt prevention tool.
A person with a poor credit history, or someone with no intention of paying, will immediately recognise that you are carrying out proper due diligence. In many cases, such individuals simply fail to return the application form or provide the information requested.
The very act of requesting detailed information can therefore help eliminate higher-risk customers before any goods or services are supplied.
Need Further Advice?
NPD & Company (UK) Limited are specialists in Credit Investigation, Company Credit Reports and Commercial Debt Recovery.
We can supply reports on Companies, Sole Traders, Partnerships and Individuals, as well as advise on the information available from various sources and how best to assess commercial credit risk.
For further information, please contact us on 020 8665 6666 or email info@npdandco.com
