How can I credit check a company to make sure they’ll be able to pay their invoice?
Adopting simple credit checking procedures for new and existing customers helps reduce the uncertainty of whether you will be paid. As the financial position of your customer will change over time, periodic reviews are a good way to avoid a nasty surprise. There are various ways to check the credit worthiness of an individual or a business:
• Most high street banks now offer some form of credit-checking service for their customers and credit reports can be purchased from the main credit reporting agencies
• A very useful source of information can come from asking those whom the customer currently deals with as to what their reputation is for paying.
Always ask for multiple supplier references to achieve a more-rounded view.
• There is a wealth of online information available. Land Charges Department records bankruptcy entries against individuals for five years. This will indicate whether the individual or company director has been made bankrupt or had a petition presented in the last five years that has not been dismissed by the Court
• Annual Accounts are available at Companies House free of charge. Your accountant can assist in making use of this information and advise you on the customer’s gearing ratio, current ratio and acid test ratio. All these tests will help inform you about the cash-flow strength of the business in question
If you are concerned about dealing with the customer because of what you uncover, upfront payments for your goods and services can still allow you to trade with them.
Darren Stone is an associate solicitor and the head of insolvency at Mayo Wynne Baxter. Mayo Wynne Baxter provides a comprehensive and personal service to a broad spectrum of local, national and international clients.