Financial checks only conducted up by around a third of SMEs

Avoiding bad debt should be a priority for SMEs so they should conduct credit checks  When dealing with a new customer or supplier, it is always advisable to carry out checks to ensure any financial issues they have don’t become a concern for your business. However, recent studies have shown that only around a third of SMEs carry out financial checks on suppliers or customers before choosing to do business with them. With the availability of credit-checking solutions now available, it is surprising that more firms aren’t taking these necessary precautions.

In addition, or prior, to financial checks, there are some initial activities that can be carried out that can help determine whether a firm is safe to deal with, to avoid detriment to your business later on.

The internet is a great resource to us all now (can we even remember a time where we couldn’t simply ‘Google’ something?) and the beauty of the availability of information is that a lot can be found out by undertaking simple searches.

For instance, some basic research into aspects such as customer reviews and ratings, the description of their offering/service on their website and checks on their company history via Companies House are a good idea and easy to do.

It is also important to establish not only whether a company is worthy of doing business with to start with, from a financial stability point of view, but whether their stability is likely to continue. For every business, cash flow is the lifeblood of the business and if a potential supplier or customer doesn’t have well-managed cash flow – which may affect them now or in the future – this will inevitably impact the firms with which it does business. Similarly, it is advisable to manage your cash flow to avoid becoming reliant on all money owed coming in at the right time.

Many credit check offerings cover a myriad of elements that can determine credit-worthiness such as whether there are any County Court Judgements against company directors or any current company debts. Business owners must be aware though that not all agencies offer the most up-to-date or accurate information – which is vital in order to make an informed decision. There can also sometimes be underlying issues that may not be evident in a basic credit check but which could affect the credit of the business in the future.

This is why it is important to choose a provider carefully. A solution that offers the most comprehensive financial checks, covering the widest range of elements using a real-time system to ensure the information is current is advisable. Whilst this may be a costlier option at the outset, it could prevent a mistake which in the future could cost far more.

Committing to continual checks is also important – how a supplier or customer is faring today might not be an indicator of how they will be in the future. Be complacent in this area at your peril!

Adams Moore offers a financial checks solution: Business Protect offers real-time information and ongoing tracking for complete peace of mind. For further information on package options, contact Tessa on 01827 54944.