Winning new business is always positive, but before you commit to a new customer it is wise to carry out some checks. A little time spent at the start can save trouble later if the customer is unable, or unwilling, to pay. We often advise business owners to put a simple process in place for checking new customers.
- Check who you are dealing with
Start by confirming the customer’s legal identity. If it is a company, search Companies House for free to check it is registered and still active. Make sure the person you are speaking with is authorised to place orders. If the customer is a sole trader or partnership, ask for basic details in writing so you know who is responsible.
- Review their financial standing
A credit check can reveal whether the customer has a history of paying bills on time. For companies, filed accounts at Companies House can give a sense of size and stability. Trade references are also valuable, especially if the customer is asking for credit terms.
- Be clear about terms and conditions
Before supplying goods or services, set out clear terms. These should cover payment dates, late payment charges, and what happens if there is a dispute. Using written contracts or standard terms gives both sides certainty. It also makes it easier to enforce your rights if payment problems arise.
- Consider how much credit to offer
Even if the customer appears sound, it may be sensible to limit credit at the start. You can increase limits once they have shown a good payment record. Asking for deposits or stage payments reduces risk, especially for large orders.
- Keep records of checks and agreements
Keep a simple file of all checks carried out, copies of contracts and any credit limits agreed. This helps if there are disputes later and shows that your business has acted responsibly.
- Trust your instincts
Finally, listen to your instincts. If something feels wrong, take more time before agreeing to proceed. It is usually better to turn away a doubtful customer than to chase unpaid invoices.
Taking these steps helps protect cash flow, which is vital for every business. We can help design a straightforward customer acceptance process, so you can grow sales with greater confidence.