So you have a brand new customer and they have asked to have credit extended with your business. A quick credit check reveals no blemishes that would cause any concern. However, the credit check only reveals part of the story. Here are some things to consider before extending credit to any new customer:
Has the customer been in business for many years? Chances are if a customer has been in business for 50 years for example they’ve probably seen a few ups and downs in the economy and have pulled through. This should qualify as a pro. If a customer just opened up shop and hasn’t been in business long enough to develop any kind of history, be careful. As soon as the next recession hits will determine their credibility.
Who is their customer?
Who does your customer get their funds from? If their major payers are insurance companies or any kind of government agency then chances are you are going to be waiting on payment since your customer is also playing the waiting game.
Be weary of the fly by night businesses! Is the customer operating out of kiosk in the shopping mall? Get a permanent address for the business. Determine if a customer could easily pick up and move elsewhere or are they fully entranced at their location.
I might add that if the company’s parent address is out of state, collecting on any debt may become more difficult.
Does the client’s name sound self-important? Adding the word “international” to the end of a business name may sound great but typically there is nothing international about the business whatsoever. Adding “and Associates” could also be a way to make the company seem larger than it really is.
If the only phone number they can provide to you is a 1-800 number, then there is a possibility they want you to get lost in a labyrinth of automated messaging making it nearly impossible to collect. Ask for a direct line to accounts payable or the CFO/Controller before doing business.