Running a business check is part of financial due diligence before doing business with someone else. Knowing your customer has never been more important as businesses all over the world continue to struggle with scams and late payments. By running a business check, you are mitigating the financial risk associated with extending credit.
Here are some reasons why you need to run a business check
Fraud is a real issue that needs to be tackled.
Before doing business with any company, you should always check they are legitimate. This does not mean just checking their website and telephone number works; every company will have a company number, and if it’s a limited business it would have registered at Companies House. You can view scanned copies of Companies House documents to verify a business and check the directors match up to who you’re dealing with face to face.
Being paid late could be the end of your business.
According to national statistics, late payments are on the rise. The UK government has even introduced a ‘Prompt Payment Policy’ for UK businesses, with a ‘practical focus on actions that support smaller businesses’. Give your business the best chance by doing your due diligence and viewing a company’s payment behaviour before you start doing business with them. This should be a vital part of your credit control system.
Losing a supplier could cost you your business.
It’s not just potential customers you need to run a business check on, it’s also upwards of the supply chain. If your business relies on supplies to be able to operate, you need to check your suppliers are financially sound and aren’t going to collapse on you. If you lose a supplier, it would leave you with no way to continue to run your business and have a knock on effect on your own customers.
You can see a true representation of what potential clients think of you.
Running a business check on your own company can help you see what potential customers and suppliers see when you’re pitching for new business. You can ensure you are doing everything possible to get your business score above your competitors and maintaining creditworthiness.
Understand payment behaviours.
If a company has a good reputation and lots of business coming in, they may seem like a huge win if you manage to take them on as a client or partner. However, you still need to understand their payment behaviour. What if they paid their bills on average 20 days late every month? That could have a damaging effect on your cashflow and something you need to analyse before signing any contracts.