Checking customer credit worthiness

[Countdown]

Due to COVID19 we're thinking about extending longer credit terms to Customers. For individuals it's generally been cash up front, for SME's we normally give 1 month credit, and for Ltd/PLC it's up to 3 months. we're considering extending these, potentially up to 1 year for large organisations. However we would want to carry out some due diligence on them (probably on a regular basis).

What companies do people use to assess credit-worthiness?
How expensive are they?
How reliable have they been?
How often do you do the checks?

Thanks in advance

[Whoozit]

Experian, £25 a month. I only know because I just got refused for a single SIM contract, went and checked, and they had my company as Dormant. Nope.

[Countdown]

Thanks.

Somebody mentioned Dun and Bradstreet. has anybody used them?

[2 sMoKiN bArReLs]

You can look at their accounts (ltd co) for free at companies house.

Have your customers actually asked for these long terms? I'd be very nervous of anything over 60 days for anybody.

(But then I'm the bloke that took on main contractors in construction & mostly won . (If anybody had been a subbie in the construction industry they''ll know how difficult that is)

[2 sMoKiN bArReLs]

I've used these in the past:

https://www.creditsafe.com/gb/en.html

[anonymous-user]

Looking at the company accounts is a good place to start.

[Simpo Two]

Countdown said:

Due to COVID19 we're thinking about extending longer credit terms to Customers.

Why not keep them as they are? Do you think you will lose business if you don't? Are there any signs of this?

Remember when this is all over, you'll have to claw them back to how they were.

[21TonyK]

My experience is the only way you really know is by getting to know the client. Its a way back now but I had several customers go under even after all the routine paper checks. It also depends a lot on your exposure in terms of monetary value and your exposure to them

I had a main contractor go pop overnight owing me 3 months... that was a lesson. Had another fly by night owing whatever it was which which was less painful.

Wifes family business used to assume nigh on 10% bad debt a year. Fishing industry for you!

[blue_haddock]

2 sMoKiN bArReLs said:

I've used these in the past:

https://www.creditsafe.com/gb/en.html

Credit safe is what credit control at our company use (massive car parts firm)

[Countdown]

Thanks for all the suggestions folks.

I'm going to get quotes from D&B and Creditsafe.

[anonymous-user]

It's seems very sector specific for us. It will vary by industry, but in our case once we stopped giving credit to law firms and creative media companies, bed debts dropped from about 8% to 1% overnight.

[Countdown]

Simpo Two said:

Why not keep them as they are? Do you think you will lose business if you don't? Are there any signs of this?

Remember when this is all over, you'll have to claw them back to how they were.

There are some big longstanding customers who are saying they've got cashflow issues. Iur business relationships have been mutually beneficial. They also have personal relationships with the CEO/Board (who are arguing that it's in our long term interests to be flexible). Our balance sheet is quite healthy mainly due to selling off some non-core assets last year. So we could extend credit terms.....

However I'm nervous....and I want something that would raise red flags if needed. That way I can warn the Board/CEO and then if the customer goes belly up I can do a Pontius Pilate.....

[2 sMoKiN bArReLs]

Countdown said:

Simpo Two said:

Why not keep them as they are? Do you think you will lose business if you don't? Are there any signs of this?

Remember when this is all over, you'll have to claw them back to how they were.

There are some big longstanding customers who are saying they've got cashflow issues.

That's the time to reduce credit terms

[Countdown]

2 sMoKiN bArReLs said:

That's the time to reduce credit terms

You're preaching to the choir

[MrBen1]

It might be worth looking at trade credit insurance - not only does this give you some insurance protection but also access to intelligence around credit worthiness of clients and potential clients. Not as expensive at you might think.

[2 sMoKiN bArReLs]

MrBen1 said:

It might be worth looking at trade credit insurance - not only does this give you some insurance protection but also access to intelligence around credit worthiness of clients and potential clients. Not as expensive at you might think.

Trouble is as soon as the insurers get a whiff of danger customer credit limits get reduced zero.

[Countdown]

MrBen1 said:

It might be worth looking at trade credit insurance - not only does this give you some insurance protection but also access to intelligence around credit worthiness of clients and potential clients. Not as expensive at you might think.

Thanks. Does Dun&Bradstreet and Creditsafe not provide the same level of intelligence?

[2 sMoKiN bArReLs]

Countdown said:

MrBen1 said:

It might be worth looking at trade credit insurance - not only does this give you some insurance protection but also access to intelligence around credit worthiness of clients and potential clients. Not as expensive at you might think.

Thanks. Does Dun&Bradstreet and Creditsafe not provide the same level of intelligence?

Creditsafe give info.

Insurance is different. You pay a premium then claim if customer goes bump.

[Countdown]

2 sMoKiN bArReLs said:

Countdown said:

MrBen1 said:

It might be worth looking at trade credit insurance - not only does this give you some insurance protection but also access to intelligence around credit worthiness of clients and potential clients. Not as expensive at you might think.

Thanks. Does Dun&Bradstreet and Creditsafe not provide the same level of intelligence?

Creditsafe give info.

Insurance is different. You pay a premium then claim if customer goes bump.

I understand that. i was just wondering if they provided a better level of intelligence than the others or if the only thing Im getting is the insurance cover..

[2 sMoKiN bArReLs]

Countdown said:

2 sMoKiN bArReLs said:

Countdown said:

MrBen1 said:

It might be worth looking at trade credit insurance - not only does this give you some insurance protection but also access to intelligence around credit worthiness of clients and potential clients. Not as expensive at you might think.

Thanks. Does Dun&Bradstreet and Creditsafe not provide the same level of intelligence?

Creditsafe give info.

Insurance is different. You pay a premium then claim if customer goes bump.

I understand that. i was just wondering if they provided a better level of intelligence than the others or if the only thing Im getting is the insurance cover..

Ah, I see. Probably not.