In a perfect world, one would be able to deliver goods or services and get cash payment in full. Unfortunately, this is the real world and you’ll have to extend credit to some, if not most, of your customers. But credit is tricky.
Refuse to sell on credit and you risk losing a lot of business; sell on credit and you risk losing your money.
When you extend credit to a business customer, you are basically taking cash out of your company and lending it to them. Whether you are extending credit for 30, 60 or 90 days, you want to be reasonably sure that you will get your money back. But how do you know if a potential business customer will pay you once you deliver the merchandise? Well, that’s easy, just perform a company credit check on your customers.
By using the right bureau (one that deals in positive data ) and performing a company credit check on both new and existing customers, you will get a good idea of how they have been handling debt in the recent past. The credit report you get once you run a credit check contains important information such as the customer’s payment history, bankruptcy records, lawsuits payment defaults and court judgements against the customer. A risk rating that predicts the likelihood of payment is also provided.
Company Credit checks are performed through credit bureaus, also known as credit checking companies. These are organisations that track the credit histories of individuals and organisations by managing a pool of data submitted by entities and individuals trading in the market.
Benefits of running company credit checks
Using a credit check company to check the history of a customer could be very beneficial to your business. It enables you to:
1. Maintain a positive cash flow. Without a positive cash flow, your business will run into difficulty managing the day-to-day cash requirements. Running a credit check on customers will help you determine whether a customer will pay you on time so that you can make the necessary arrangements. Maintaining a positive cash flow is highly dependent on predictability; the better you can predict when you’ll get paid, the better you can plan.
2. Avoid bad debt. Bad debt is every business’ worst nightmare. By running a credit check on a customer, you will be able to find out their creditworthiness and their likelihood of paying the debt.
3. Determine suitable interest rates. The more you risk, the bigger the reward should be: that’s the general rule of business. If you are going to risk giving credit to a person, you want to impose an interest rate that matches that risk. Credit checks will help you determine the risk.
4. Estimate how long a business will be in operation. If you are looking for a long term partner, this information is important. You don’t want to invest in a business relationship and then have it end because your partner went under. By conducting a credit check, you can tell whether a company is healthy or not.
5. Value a company. Credit is a transferable asset. If you are looking to buy a business, a good credit rating will make a business more valuable as you can ride on it once you acquire the business.
Company Credit Checks Online
Thanks to the internet, performing a credit check on a company has never been easier. All you need to do is visit the website of a reputable credit reporting bureau, such as CreditWorks, (which is a leader in the Positive Data credit space) and follow the instructions. Once registered, the credit report will be available for you to download directly from the website, or sent to you via email.
The benefits of conducting company credit checks online include:
- Checking the business credit of any company is as simple as a couple of clicks.
- You’ll get the information you need instantly or within a very short time.
- Up-to-date reports. Since information is sent to you quickly, all the latest data collected about the company you are checking will be included in the credit report.
To know more, visit CreditWorks at www.creditworks.co.nz or contact them on +64 (9) 5200626.