Customer Credit Checks Essential in Christmas Sales Rush

Small businesses need to ensure they credit check customers in the run up to Christmas or risk selling to individuals and firms which later prove unable to pay, a debt recovery firm has warned.

Carole Hughes, Managing Director of debt recovery firm Daniels Silverman, said that as the Christmas season goes into full swing, and shoppers rush to beat the January VAT increase, many small businesses are neglecting credit checking procedures.

“Small firms will pay the price later as customers default on payments for goods received in December. A sale is not a sale until paid in full. However, we see many small firms that, buoyed by the prospect of a sale, have failed to follow the fundamental credit checks to ensure they are dealing with a reputable company or individual, capable of fulfilling the payment terms agreed at a sale.”

She added that there were an increasing number of cases where customers have misled businesses about their ability to pay.

“Ultimately, failing to carry out basic credit checks can be expensive.”

Hughes said firms should credit check new customers by:

  • Completing a comprehensive credit application form for every new customer.

  • Asking for a copy of your customer’s standard letterhead and checking all the details match up. Many professional debtors try to avoid creditors by using trading names which are different to their legal registered company title.

  • Credit checking both the business and its directors. This may highlight a previous history of dissolved or liquidated companies.

According to research from Bacs in June this year, 45% of small firms have experienced late payments, and the average amount owed is £32,000.

To calculate the interest owing on late payments use the FPB’s late payment calculator. See also our business advice article on Credit Control and Setting up a Credit Control System.

Customer Credit Checks Essential in Christmas Sales Rush

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