Bad customers undermine your cash flow.
...Dig a little deeper.
Exactly who are your customers to you? While it's easy to look at them as just the strings of numbers at the bottom of your invoices, it's worth looking more closely at the people you're doing business with. When you're safeguarding your cash flow, a little extra information now could be all the warning you need to steer clear of trouble.
A lot of small business owners feel awkward running checks and asking questions about their trading partners. That's natural enough. No one want to feel like they're snooping - unless you're actually a hard boiled gumshoe or globe-trotting secret agent, of course. For the rest of us, though, sniffing around our customers' credit histories can feel a little awkward.
The thing is, that research is actually good for everyone. Finding out that your customer's likely to have trouble paying up before the deal's struck means that neither of you gets bogged down in debt troubles further on. Even honest customers can get into deep water. By checking them out now you might be saving them from drowning later - and dragging you to the bottom with them! If you do end up having kick off some unpleasant legal action over an unpaid bill, knowing exactly who you're dealing with is absolutely critical.
If you want to look after your customers, maintain your cash flow and protect your business, here's what you need to know:
What you're trying to do is build up a profile, one where you've checked the facts for yourself. Getting a credit reference agency to verify your customer's details and status is always a good move, but there are things you can do on your own, too. For instance, if they're a Limited Company, you can check up on a lot of the important stuff for free at Companies House.
Also, think about any credit they're asking for. Does it seem like a good risk, given what you know about them? If you push for more information, do you get it without a struggle? When you do, does their story still add up with what you already know?
The main point of all this is that you can't afford to be scared of looking into your customers. In fact, if they're smart they're probably doing the same to you. When it comes to safeguarding your cash flow, you need to know who you're doing business with before you commit yourself. Remember, the best way out of a hole is not to dig it in the first place.
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