[This is a guest post]
So you have got your business underway, it is setup correctly, you have products for sale or services already geared up to offer. Marketing gets underway and you start getting enquiries. Now hopefully this will all go well because while enquiries and orders are fantastic, the people that ask for your products or services will have the money to pay for them.
This may sound like stating the obvious. But it is not uncommon, however, for someone to go into business naively thinking that the people asking you to provide them with a service or product will have the money to pay for it.
Payday loan company Wonga recently blogged about how, sadly, this is not the case and, particularly if dealing with a new or bigger client where you are providing a lot of stock or investment of time, you may wish to check out their creditworthiness.
You can use a service such as the company credit report service offered by several organisations. These reports can highlight any potential cash flow issues or whether the company have had problems paying bills in the past. These reports can also include County Court Judgements (CCJ) information.
When you first start in business it is easy to think that you need to take on any work and that companies will walk away from you if you ask for credit references. In the early stages of your business you need to make sure you can mitigate any risks to your cash flow that can kill your business before it gets off the ground.
Even with high street names, you should check their credit worthiness as we have seen a number of well known names disappear, taking a lot of smaller companies with them. These include a number of retail stores. These can bring you down with them, yet for the sake of a few pounds, you can find out if these businesses are credit worthy and save yourself a lot of time, effort and heartache if they can’t pay their bills.
In a nutshell, if your clients don’t pay your bills, you won’t be able to pay yours!
Your business will have a credit report too
On the reverse side of this, it is also a good idea to check your own business credit worthiness at times, in the same way you check your personal credit history file. This could highlight any future issues. It also means that having a credit worthy enterprise that wants to attract business from bigger companies will be better placed.
So consider being credit worthy as a business development / marketing exercise, not an accounting one. Even the most non-number orientated person will be able to see the benefit of keeping on top of this.
Building in credit worthy checking with new customers as part of your sales process may save you time and financial stress further down the line trying to get monies owed from a financially unstable company or one that suddenly goes in to liquidation. This will help you build a business with very little risk and help it survive and prosper.
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