The fewer customers you have, the more it will affect your business if one of them flounders and sinks. You won’t always be told about this until it’s all washed up and you are left with a bad debt and a big hole in your income.
Clues
Have your bookkeepers $1 told you that their payments have been getting later? Have you tried to call your contact and found the person is always in a meeting and never rings you back? If you do get to talk to them, do they seem distracted and evasive?
Perhaps their cheques been unsigned or contained errors so they’ve had to be sent back and reissued, delaying the moment the cash is removed from their account. You or your staff might have picked up rumours going around about them.
Seeing How the Clues Add Up
If your instinct tells you that something is wrong, it’s time to research their financial status. Talking to them isn’t likely to be enough to allay your fears, so your first port of call could be the Companies House website, where you can see the accounts they have filed. But remember that these will not give the whole picture as they won’t be completely up to date.
The most current information will lie with the credit agencies. You have to pay for the services of the likes of Experian or Equifax, but their information is reliable and useful. If you don’t have time for tasks like this, why not ask you bookkeeping service to do it for you?
Reduce the Risks to Your Business
With this information, you can decide whether to reduce the credit you allow the customer, offer them different payment terms, or sever the connection altogether. There are many ways to reduce the risks of not receiving payment for the goods or services you supply.
