Credit checking a potential company is an integral part of your credit management policy. Ultimately you are able to from your investigation determine the risk that your company will undertake be offering the potential customer credit.
Considerations should include:
• What is the company formation and are they protected by limited liability?
• What are the directors other current appointments?
• What are the directors’ previous appointments?
• Have the directors been involved with companies that have gone into liquidation, administration or been dissolved?
• Does the director have a non trading company sitting in the background?
• Is the trading address cited the true trading address?
• Is the directors cited domestic residence correct and do they appear on the electoral roll.
• Does the company have any CCJ’s
• Are their any mortgage charges assigned?
• Who are the company shareholders?
• If the company shareholder is a company, do I need to investigate that also?
• Does the director have other appointments that might be cited at a different address and therefore not immediately apparent on your initial investigation?
• What is the current credit score for that customer?
• What is the suggested current credit value for that customer?
• What is the trading status of the customer?
• What financial information are you able to ascertain?
• Has there been a company name change previously?
• If there has been, does this relate to a pre packaged administration?
• Has there been a winding up order previously on this company?
• How erratic has their credit rating been?
Once you have taken into consideration the above information you are able to assess the credit worthiness of your potential customer. Based on your findings you are then able to either:
• Decline from the potential custom
• Request payment in advance or on delivery
• Offer unsecured credit and run the risk within payment terms that are acceptable.
• Offer credit with a personal guarantee and reduce the risk
• Do nothing and hope for the best!
Remember the credit environment has changed globally in the last four years. Personal guarantee’s are no longer a dirty word and are in some industries considered to be standard practise. Therefore as a business you can plan a credit management policy that suits your business.
If you are offering credit to a customer, it will remain a liability until the subsequent invoices are settled. Consequently an order is only a sale when it’s paid for, until then it’s a potential debt!
If you ask the bank for a loan, you will be credit checked and you have to sign an agreement. This is because banks are financial institutions that understand the risk of lending, particularly now!
Would you lend money to someone who you didn’t know? If the answer is “yes”, then perhaps you’d lend me some! If the answer is “no” then why are you offering credit to a customer that you have no knowledge of, with the hope that they will eventually pay?
So there is the argument that it’s better to have the custom as opposed to being exceptionally cautious and having no business! But if the customers don’t settle their bills, then do you ultimately have a business in the long term anyway?
Furthermore if your potential customer is a large corporation they may dictate the terms of credit that you offer based on the fact that you won’t decline their offer of business. But a credit check will assist you in making a informed decision and determine if the potential risk is worth taking.
Forewarned is Forearmed, and when taking on the risk of credit it is essential.
The ICE PACC will automatically perform a credit check for all of your potential customers and then cite the potential risk of offering credit prior to engaging their custom. This is a small aspect of the service that you receive from subscribing to this unique and comprehensive credit management tool.
Contact us directly at info@icepacc.com
Wednesday 19 January 2011
Thursday 13 January 2011
Will your New Customer kill your business?
When you are approached by a potential customer you will no doubt be excited by the addition to your revenue stream. However consider the following:
The addition of this potential customer significantly increases your company’s net profit and is considered a life changing opportunity for you and your business. Consequently you eagerly approach your bank for an increase in your business overdraft in order to facilitate the new business that your customer requires you to undertake. The bank authorises the overdraft, however you are required to sign a personal guarantee in-case your business is unable to repay the loan. You happily sign the agreement certain that the revenue from your new customer and subsequent profit will alleviate any such problem.
With the overdraft in place and your new customer on board, business could never be better!
You’ve agreed 90 days payment with your new customer, not ideal, but acceptable based on the level of business they are bringing to your company.
90 days after the first invoice has been submitted the customer has still not settled their fist invoice. Furthermore the total outstanding account, if not paid, will cripple your business. However your customer assures you that the delay is simply down to the accounts department and the fact that you are a new supplier.
120 days later you begin to get concerned as none of the invoices have been settled and the outstanding amount if not paid will put your company into an insolvent position. However you continue to service the customer in order to ensure that there is no ill feeling, that may prevent further orders, and that payment of existing invoices is eventually made.
180 days later you receive correspondence from an insolvency practitioner stating that your customer has gone into administration and that you are invited to submit the amount that you are owed so that it can be added to the creditors listing.
With your overdraft in full use and very little other receivables to rely on you read the insolvency practitioners correspondence with complete and utter dread. Questions running through your brain:
• How am I going to pay the wages?
• How am I going to pay my bills?
• How am I going to pay my overdraft?
• What am I going to say to my family?
• How am I going to survive?
After visiting the bank to explain you realise that they are not going to support you and very quickly you are forced to liquidate your business.
Moreover the bank calls in the personal guarantee on your loan which eventually results in you having to sell your house, as a result of a force of sale.
The stress of the business failure and subsequent cash strain on you has a detrimental effect on your relationships at home.
You are left with no business, strained relationships at home and a complete loss in confidence!
If only you had taken time to consider the customers credit reports and subsequent score so that you could truly assess the risk that you were undertaking.
Furthermore you needed to plan your credit management policy so that you ensured that your receivables were received.
A comprehensive credit management policy can assist in preventing bad debt and at the same time promote prompt payment in order to assist your cash flow.
More importantly your terms of credit need to reflect the risk that you are undertaking. Had you in this situation insisted on a personal guarantee you may not have been awarded the business. However since non payment has resulted in the demise of your business, the perhaps this may have been a good thing! Had you obtained a personal guarantee likely hood is that you would not have found yourself in this horrid situation.
A few months on you see your customer, driving a expensive car and find that he still in business and is doing well as a result of the pre packaged administration of his previous company. You feel angry, frustrated and defeated!
Hindsight is a wonderful thing, but what is certain is the fact that prevention is better than the cure.
ICE PACC is designed to prevent such scenarios from happening and as a credit management tool can be used to assist you and your company from limiting your liabilities thus reducing the risk that you as a business undertake when offering credit to potential customers.
The ICE PACC will:
• Assess your potential customers credit worthiness
• Offer terms that will hold the customer to account
• Provide you with a comprehensive online credit management tool
• Facilitate FREE pre legal debt recovery.
For further information contact us directly at info@icepacc.com or view the product at www.icepacc.com
The addition of this potential customer significantly increases your company’s net profit and is considered a life changing opportunity for you and your business. Consequently you eagerly approach your bank for an increase in your business overdraft in order to facilitate the new business that your customer requires you to undertake. The bank authorises the overdraft, however you are required to sign a personal guarantee in-case your business is unable to repay the loan. You happily sign the agreement certain that the revenue from your new customer and subsequent profit will alleviate any such problem.
With the overdraft in place and your new customer on board, business could never be better!
You’ve agreed 90 days payment with your new customer, not ideal, but acceptable based on the level of business they are bringing to your company.
90 days after the first invoice has been submitted the customer has still not settled their fist invoice. Furthermore the total outstanding account, if not paid, will cripple your business. However your customer assures you that the delay is simply down to the accounts department and the fact that you are a new supplier.
120 days later you begin to get concerned as none of the invoices have been settled and the outstanding amount if not paid will put your company into an insolvent position. However you continue to service the customer in order to ensure that there is no ill feeling, that may prevent further orders, and that payment of existing invoices is eventually made.
180 days later you receive correspondence from an insolvency practitioner stating that your customer has gone into administration and that you are invited to submit the amount that you are owed so that it can be added to the creditors listing.
With your overdraft in full use and very little other receivables to rely on you read the insolvency practitioners correspondence with complete and utter dread. Questions running through your brain:
• How am I going to pay the wages?
• How am I going to pay my bills?
• How am I going to pay my overdraft?
• What am I going to say to my family?
• How am I going to survive?
After visiting the bank to explain you realise that they are not going to support you and very quickly you are forced to liquidate your business.
Moreover the bank calls in the personal guarantee on your loan which eventually results in you having to sell your house, as a result of a force of sale.
The stress of the business failure and subsequent cash strain on you has a detrimental effect on your relationships at home.
You are left with no business, strained relationships at home and a complete loss in confidence!
If only you had taken time to consider the customers credit reports and subsequent score so that you could truly assess the risk that you were undertaking.
Furthermore you needed to plan your credit management policy so that you ensured that your receivables were received.
A comprehensive credit management policy can assist in preventing bad debt and at the same time promote prompt payment in order to assist your cash flow.
More importantly your terms of credit need to reflect the risk that you are undertaking. Had you in this situation insisted on a personal guarantee you may not have been awarded the business. However since non payment has resulted in the demise of your business, the perhaps this may have been a good thing! Had you obtained a personal guarantee likely hood is that you would not have found yourself in this horrid situation.
A few months on you see your customer, driving a expensive car and find that he still in business and is doing well as a result of the pre packaged administration of his previous company. You feel angry, frustrated and defeated!
Hindsight is a wonderful thing, but what is certain is the fact that prevention is better than the cure.
ICE PACC is designed to prevent such scenarios from happening and as a credit management tool can be used to assist you and your company from limiting your liabilities thus reducing the risk that you as a business undertake when offering credit to potential customers.
The ICE PACC will:
• Assess your potential customers credit worthiness
• Offer terms that will hold the customer to account
• Provide you with a comprehensive online credit management tool
• Facilitate FREE pre legal debt recovery.
For further information contact us directly at info@icepacc.com or view the product at www.icepacc.com
Wednesday 12 January 2011
Credit Control Software featured on Credit Management Matters
ICE PACC is now featured on the Credit Management Matters website, offering subscribers the opportunity to manage their credit control in a more effective manner. The innovative online system will assess your potential customers credit worthiness, incorporates a comprehensive, easy to use, credit control system and offers FREE pre-legal recovery when payments are late.
To view the link go to: http://www.creditmanagement.org.uk/
To view the link go to: http://www.creditmanagement.org.uk/
Wednesday 5 January 2011
Credit Managment Policy 2011
Have you decided upon a New Years Resolution this year, or are you not bothering?
Perhaps you’ve considered taking up a new fitness regime, not drinking as much, stopped smoking or some other discipline to make your lifestyle healthier.
Alternatively you may have decided to have a change of attitude to your outlook on life, be more dynamic, work smarter or indeed spend more quality time with your family?
Its fair to say that New Years Resolutions are often fairly short lived and within no time we are living our lives as we have always lived them.
Why do we make New Years resolutions in the first place? For some it’s just tradition and for others it’s because they really want to change something about their life or business.
So I guess the question for me is, do you really want to make a difference to your business? Furthermore if you have identified an opportunity to reduce bad debt and increase sales by growing your client base then read on!
A comprehensive credit management policy can often be seen as being a business inhibitor as it may be deemed too restrictive by the customer and thus a deal breaker. This does not have to be the case if it is both well thought out and presented to demonstrate a proffessional approach committed to great customer service.
Remember, if you are offering credit, whether it be seven days, thirty days or more, you are exposing your business by the undertaking of a liability. Obviously the risk being that you may not get paid, or that payment is delayed causing cash flow issues for your business.
So take time to plan your credit management policy.
• Do I wish to assess the credit worthiness of my potential customer?
• Do I wish to offer secured or unsecured credit?
• How do I document my Orders / Deliveries / Customer Satisfaction
• How do I document my customer correspondence?
• Do I get customers to sign all relevant correspondence?
• Who is authorised to sign correspondence on behalf of the customer?
• How do I reduce the risk of potential disputes?
• How do I deal with disputes?
• Are disputes documented both when they are raised and resolved?
• How do I issue my invoices and ensure that they have been received?
• How do I monitor the ongoing credit worthiness of my client to ensure that during the longevity of our relationship their circumstances don’t change?
• What do I do when the payment terms expire and monies have not been received?
• What do I do when request for payments are rebuffed?
• How do I recover my outstanding monies both pre-legal and legal?
• At what point do I employ a legal representative to assist me?
By answering these simple questions you will start to map your current credit management policy and hopefully identify areas that will require improvement.
Over the course of the proceeding weeks I will be addressing each question specifically and offering my view point in order to assist you and your business and why, as a result, a comprehensive credit management policy can assist your sales and cash flow whilst reducing your business exposure. Further more my plan will assist when you are required to seek judgment against your customer.
Remember Credit Management is often like a hang over, the following day when you are feeling the pain, whether it be due to excess alcohol or non payment, you mutter; “Never never again!” – Until the next time!!
So let’s make our New Year Resolution that our credit management policy will be comprehensive and well planned in order to promote and preserve your business!
Have a great 2011!
ICE PACC is a comprehensive on-line credit managment system. www.icepacc.com
Perhaps you’ve considered taking up a new fitness regime, not drinking as much, stopped smoking or some other discipline to make your lifestyle healthier.
Alternatively you may have decided to have a change of attitude to your outlook on life, be more dynamic, work smarter or indeed spend more quality time with your family?
Its fair to say that New Years Resolutions are often fairly short lived and within no time we are living our lives as we have always lived them.
Why do we make New Years resolutions in the first place? For some it’s just tradition and for others it’s because they really want to change something about their life or business.
So I guess the question for me is, do you really want to make a difference to your business? Furthermore if you have identified an opportunity to reduce bad debt and increase sales by growing your client base then read on!
A comprehensive credit management policy can often be seen as being a business inhibitor as it may be deemed too restrictive by the customer and thus a deal breaker. This does not have to be the case if it is both well thought out and presented to demonstrate a proffessional approach committed to great customer service.
Remember, if you are offering credit, whether it be seven days, thirty days or more, you are exposing your business by the undertaking of a liability. Obviously the risk being that you may not get paid, or that payment is delayed causing cash flow issues for your business.
So take time to plan your credit management policy.
• Do I wish to assess the credit worthiness of my potential customer?
• Do I wish to offer secured or unsecured credit?
• How do I document my Orders / Deliveries / Customer Satisfaction
• How do I document my customer correspondence?
• Do I get customers to sign all relevant correspondence?
• Who is authorised to sign correspondence on behalf of the customer?
• How do I reduce the risk of potential disputes?
• How do I deal with disputes?
• Are disputes documented both when they are raised and resolved?
• How do I issue my invoices and ensure that they have been received?
• How do I monitor the ongoing credit worthiness of my client to ensure that during the longevity of our relationship their circumstances don’t change?
• What do I do when the payment terms expire and monies have not been received?
• What do I do when request for payments are rebuffed?
• How do I recover my outstanding monies both pre-legal and legal?
• At what point do I employ a legal representative to assist me?
By answering these simple questions you will start to map your current credit management policy and hopefully identify areas that will require improvement.
Over the course of the proceeding weeks I will be addressing each question specifically and offering my view point in order to assist you and your business and why, as a result, a comprehensive credit management policy can assist your sales and cash flow whilst reducing your business exposure. Further more my plan will assist when you are required to seek judgment against your customer.
Remember Credit Management is often like a hang over, the following day when you are feeling the pain, whether it be due to excess alcohol or non payment, you mutter; “Never never again!” – Until the next time!!
So let’s make our New Year Resolution that our credit management policy will be comprehensive and well planned in order to promote and preserve your business!
Have a great 2011!
ICE PACC is a comprehensive on-line credit managment system. www.icepacc.com
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