In the last article we discussed the contents of the credit application form and provided a template credit application form as an example, so, now it’s time to look at how we verify this information. It will be quite difficult to verify the information manually so in most cases it is preferable to use credit checking software. There are a few options with regards to software but in the most part they provide very similar information but vary wildly in price. Systems that we have used include Experian, Equifax and Riskdisk.
All the systems above layout the information in similar way and will provide a score of some sort that help to identify the riskier customers. The information you are looking to verify includes:-
- Verification of trading address and contact details.
- Verify the customer has no adverse credit history (CCJ, Winding up Petition). There will normally be a screen with information. If there is detrimental information the risk and score is much higher.
- Verify financial information. Is the company making a profit and does it have a strong balance sheet.
- Verify directors details and check for other directorships and their respective scores. This is invaluable to establish patterns and trends for people who set up numerous companies with the intention of deceiving people.
If there is anything that concerns you on the credit report then this is the right time to speak with the customers and get the answers. You haven’t given them any credit yet and a simple phone call can give you a good idea of what type of company you are dealing with. If you are happy with the credit report most of the systems above allow you to place the company into a monitoring status. This effectively means that the software will flag any future changes to the score and the reasons behind them. It’s important that you continue to monitor companies on a quarterly basis. Please remember that business do fail and you want to make sure that your business doesn’t succumb to bad debts.
Our next article will look at the account opening process now that we have a positive credit score. If you have any questions regarding the process and you feel we have missed any information then please help us by commenting on this post