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In Focus Commercial Credit

“I know my customer personally. I have worked with them for years. I do not need to credit check them.”

We hear this a lot, when we are talking to our small-business customers. The thinking is led down this path because the creditor may believe that:  They are on friendly terms with this customer, so there are no issues.  They are friendly with the customer so the creditor would instinctively know if there were issues.  If there were issues, the customer would come and talk with them about it because they get on great together.

I do not think that there would be much argument about whether your personal relationships were key to business success. You will not get your next deal unless you develop a relationship with your potential customer. You will not get your project delivered unless you have good relationships with those involved. You will not get that vital good word of mouth recommendations unless your client believes in you.

Be prepared

However, you should not lose sight of the fact that, when push comes to shove, we all have an overriding commitment to our own business above any considerations for the businesses of others.

‘Forewarned is forearmed’ as my Gran used to say. It is always best to know about potential issues at the earliest opportunity so that you can take appropriate steps before it is too late.

That applies even when the potential issue involves someone with whom you have a good personal relationship.

Which conversation would you rather have? Option 1: Q: “Hi Dave, I have noticed that your company has had an adverse credit event recently and I just wanted to check in and see whether there is anything that we need to do in order to ensure that our recent invoices get paid on time?”


A: “Ah yes. We had a bit of a blip, so hoped we could pay you £5,000 now and then £5,000 in four weeks. Is that OK?” Or, alternatively Option 2: Q: “Hi Dave, your account is now overdue £10,000. We need this paying.” A: “Yes. Sorry. We have been having a few issues recently and we have not been able to pay it all. We will be able to pay it soon.”

Which sounds like it is a conversation that might keep the relationship in a positive place going forwards?

An honest approach

That is the thing about good relationships. You should be able to be honest with people, they will not judge you, they will see your side, and they will work with you to find something that works for everyone. To do that, you need to know as much as possible about who you are trading with, even if you think you do know them very well. An independent view on the company in the form of a credit report will help you see what is important and not become blind to things that might damage your business.

March 2017

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