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SPECIAL REPORT
A RISKY BUSINESS
The Promotional Merchandise Trade Association (PROMOTA), looks into the
importance of credit checks and explores other methods of checking
the credibility of a company.
A
ccording to research by the Federation of step is to check you have the basic information to relationship or losing business all together.
Small Businesses in 2009, small firms were begin with. Every limited company is required by Steven said: “No matter the size of your
waiting up to four months for invoices to be law, to quote its registration number in legible organisation, or the one you are dealing with, no-
paid, some by big brand names. And it is these late characters on all business letters, order forms, one should feel embarrassed about running a credit
payments that are one of the factors responsible emails and any websites it operates and this, along check. In today’s economy you need to know more
for crippling a business and are often the reason with the full company name is vital when running about who you are working with more than ever
for a business having to close. Timely payments are any kind of credit check. before.”
crucial for small businesses which operate on tight Steven said: “You can make a search by either the In reality it is just best practice to pay invoices on
margins and rely on a steady cash flow to keep company name or registration number if you are time and on the other side to follow up any
them afloat. looking at a PLC or a Limited company. This will outstanding payments in a professional and timely
It is very important to exercise good business give you access to their accounts, credit scores and manner. Small businesses should also remember
practice and also common sense ahead of limits, CCJ information and director information.” that if payments are not made within the
extending credit to any business. In the same way If the check reveals a less than perfect credit contracted terms, interest can be charged.
that you can test drive a car before buying it, history, it doesn't automatically mean you shouldn't There are other methods of checking a company’s
looking into a company’s credit history is an do business with that company. It does, however, credit history. Trade references are a way of looking
important step ahead of any business deal. allow you to make an informed decision about the through other people’s experiences in dealing with
There are many methods of checking whether a proposed deal. You may, for example, want to ask the company in question. The only downside of this
company is creditworthy and obtaining a credit them to pay part of the bill up front or give is that the company will usually provide references
report is one way of telling if a business will be them shorter payment terms. from their best customers, not those who have had
able to pay on time or not. The detailed information If you have a long-standing client base, it is bad experiences with them. Accreditation to a trade
in a credit report can help with a decision about important to continually check payment patterns – association such as PROMOTA, is another useful
whether or not to extend credit in the first place. just because a business is a long-standing customer tool in establishing the credibility of a company -
Riskdisk Ltd is one of the UK’s most trusted does not mean they are creditworthy. accreditation confirms that a company is well
business credit reference agencies, providing In the same way, don’t assume that large, multi- established and reliable.
500,000 large, medium and small businesses with national companies will have a perfect credit In an ideal world, of course, you would only deal
credit reports every month, plus a complete online history. Appearances may be deceiving and with customers who returned a perfect credit
service to nearly 20,000 companies. although a prospective client may be saying all the history when checked. However, in today’s
Steven Marriott, performance manager at Riskdisk, right things, if you do decide to trade with them it economy, few companies have the luxury of being
said: “The aim of a credit reference agency like is important to check their financial history first. able to do that. The process of credit checking, and
Riskdisk is to provide you with a reliable, accurate Remember that even very large, prestigious, looking for other endorsements such as trade
and yet inexpensive source of information and multinational companies can fail and in the last references or accreditation to trade associations
enable you to assess the suitability of your few years we have seen the demise of big names which allow you to make calculated decisions, will
customers and minimise the risk of bad debt. You such as Woolworths and Jessops. help you to minimise the risks that can occur when
can log on to a system like Riskdisk for a small fee. If a company is taking longer and longer to pay, extending credit.
If you are checking a company, you can do this find out why – there may be a good reason. The
without permission as the information available is main problem in these types of situations is that
in the public domain.” many small companies are reluctant to ask larger For more information about PROMOTA, call 0845
Running a credit check is a simple process. The first businesses to pay up in fear of damaging a 371 43 35 or visit www.promota.co.uk
| 12 | March 2010 www.printwearandpromotion.co.uk
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