Business used to be simple, but as the years have gone on it have become easier for companies to hide unfavourable information or portray themselves as trustworthy. The number of insolvencies is getting larger every year, and that means that businesses are being more cautious than ever. Protocols have changed, the days of speaking with clients face-to-face over a drink and sealing the deal with a handshake are long gone. Every business is different, they operate differently, offer different products/services and vary in their ability to manage their finances. At Commercial Domestic Investigations, we wanted to share the top considerations that you need to make when entering into a new business relationship.

Know your customer

It’s important to get to know your customer, begin by finding out how the company has been set up. Are they a limited company? A PLC? Or a sole trader? Whatever it is, this information gives you an idea of the structure of the business and who is responsible if invoices go unpaid. Find out as much as possible about the director, their full name address and previous companies they may have been in charge of. If the director has been in charge at a lot of failed companies, then it may be cause for concern.

Check their credit score

A credit score is a quick, simple way to evaluate a company. If a company has a high score, then they can be seen as a low risk. In today’s world, you need to be aware of a company’s creditworthiness before you begin to trade with them, it is irresponsible to enter into a new relationship with no idea of their financial position or stability.

Set a credit limit

Offering a credit limit to customers is a good way of improving sales and building a relationship with your clients. Smaller businesses should be extended smaller limits. A credit report will give you an idea of a business’s financial position, and this will help you to make a decision about setting a credit limit. To find out more about setting a limit, read our blog.

Unfavourable history

A major consideration when forming a new relationship is a company history. While things do change and you can’t judge a business completely on their past, it does give you a good idea of how they operate. If they have treated people poorly or continually missed payments then are they really a client that you want to deal with? Ask the client for trade references and make sure that you follow them up, speak with other companies that have dealt with this client and build a comprehensive view of them, it’s your job to protect your cash flow.

CCJ’s

Part of an unfavourable history is the issue of CCJ’s. While a business may be able to hide disputes with clients, they cannot hide legal action; a CCJ remains on a credit report for six years. When it comes to CCJ’s, you should use your own judgement, one CCJ may not mean the end of the relationship, but six or seven should ring several alarms.

At Commercial Domestic Investigations, we offer a complete solution for your credit management needs. Credit reporting should be a part of your credit control procedure; a credit report can protect your business from a lot of unnecessary trouble. However, if you are already struggling with overdue accounts and evasive clients, then an invoice collection service can help to ease the pressure and free up your resources. To find out how we can help your business, get in touch with our team on 08444 159200, use our contact form or email sales@commercialdomesticinvestigations.co.uk.