Chapter 1
Reason 1 - Get an insight into the financial stability and decisiveness of companies
A credit check can be carried out with the help of a financial company report or credit report. These reports have the necessary information to perform a credit check.
The following is an overview of the crucial elements that a credit report should contain in order for you to make an informed credit decision. For example, the reports from Creditsafe contain all possible financial data elements to effectively make an informed business decision.
Credit score indication and credit limit
Legal information
Filed annual accounts
Official company information
Director Information
Payment behavior data
Linked companies and possible group structures
Chapter 1
Reason 2 - Reduce outstanding invoices and optimise your DSO
By checking your business relations for their creditworthiness or credit rating, you will be able to determine (and see) the credit risk per customer.
In other words, you verifiy whether your (new) customers are in a position to pay the invoice for your services. If you do this proactively and with every (new) customer, you’ve started streamlining your credit management and you can significantly reduce your outstanding invoices.
Credit checks allows you to optimise your DSO.
The DSO or Daily Sales Outstanding measures the average number of days a company waits for payment of an invoice after selling products or services.
If it is too high (and after the due date), your payment terms need to be tightened. You can support this with the help of an appropriate and careful credit check.
Chapter 1
Reason 3 - A credit check helps your finance (and even your sales) department in your customer acceptance process
By running a credit check on potential customers, it simplifies your organisation's customer acceptance process and assists you in determining any payment terms. A simplified explanation below.
For example, if a new customer with a high credit risk presents itself, you can choose to accept this customer on condition that he or she always pays in advance. Customers with an average to low risk can be offered a more flexible payment strategy by working with the payment of a deposit. A recurring customer who always pays on time and has a very low credit risk can even be given the necessary ‘credit trust’, by allowing them to pay afterwards.
Furthermore, by sharing this information and data with your sales department, the sales staff can also focus on companies that are actually creditworthy and profitable. This avoids the necessary financial annoyances for both departments and allows you to keep your own liquidity and cash flow healthy, with a real chance of a steady increase in turnover.
There are various ways to support this. You can do this by integrating the company data into your CRM system, you can give the sales staff access to credit reports and, obviously, you should of course meet with them regularly to share analyses and insights.
Chapter 1
Reason 4 - Credit check also your suppliers
Performing a credit check goes even further than just your customers.
One aspect that gets overlooked is carrying out a credit check on your suppliers, in order to maintain the continuity of the supply chain (and therefore the entire organisation).
Suppose a crucial supplier goes out of business, your organisation could be in trouble. Your productivity will be compromised, which will reduce your turnover and loss of customer potential.
You should also investigate whether your suppliers can provide the desired quantity, which is necessary to support your continuity. You can easily assess this by using purchase limits, included in credit reports.
Even if you have to pay suppliers in advance, there is always a chance that you will not see your money again. When a supplier goes bankrupt, you lose the money and are left without the necessary supplies. This can have a huge impact on your cash flow and working capital. Before you make a down payment to a supplier, check how creditworthy the company is.
How big is the risk that the company goes bankrupt and can no longer make any deliveries to you?
Chapter 1
Reason 5 - A credit check can be of gold value in times of crisis
The financial (banking and country) crisis of 2008, the COVID19 pandemic as we know it today, are just two examples where every company is affected.
One of these consequences is the loss of customers and turnover due to an increase in the number of bankruptcies, an increase in the number of non-payments, outstanding invoices and write-offs.
Therefore, it is vital to keep your own cash flow, working capital and liquidity well under control in order to strengthen the business continuity of your organisation. Credit checks and consulting credit reports will really help you with this, as you will be checking every possible negative impact and credit risk assessment.
Also, and this can be done very easily via Creditsafe, it is strongly recommended to monitor your existing customers and suppliers, so that you can be automatically notified of any changes in your portfolio’s.
Through a credit check and a monitoring message, you stay on top of these things and you strengthen your credit management and credit control in times of turmoil.
Do you want to get started with some free credit checks?
A credit report ( = performing a credit check) helps you to understand with who you are actually doing business with and if it’s safe (and calculated) enough to do so.
By looking at all possible financial company information and as well at the credit score assessment, you learn more about the financial performance of a company.
The days of working in blind faith should actually be long gone. Gathering company data is the new gold, as it will support you in making well-informed (credit) business decisions.
It is like steering a ship in a thick fog. Without using and gathering the necessary information, the chances are much higher that sooner or later you will run into a cliff, causing serious damage to the ship and even the possibility of the ship sinking. Business information reports or credit reports are the foghorns that can warn ships in time of approaching problems.
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