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It may pay to check

by Mark Rowe

It sounds obvious but, before you start working with a new customer, make sure that you are dealing with a real business. Four out of ten businesses that start up and register never actually go on to trade at all. Beyond telephone and email correspondence, check out the address (in person or using tools like Google Street View) to ensure they are who they say they are and to confirm trading status.

That is according to the credit checking company Experian. It says that more than half of small and medium businesses are putting themselves at extra and unnecessary risk of cash-flow problems and insolvency by failing to run credit checks on customers or suppliers.

Ade Potts, Managing Director of Experian’s SME business, said: “Given that almost 20,000 businesses became insolvent in 2013, credit checks serve a vital purpose for the long-term success of a business. Carrying out a credit check on any kind of new business partner should be standard practice. This is especially important for microbusinesses, which make up 72 per cent of the UK business population. In most cases, they will simply not have capital or savings to fall back on if they face having to wait months for a payment or, in the worst case scenario, find they do not get paid at all.”

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