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Our Top 3 Tips for Checking Your Customer’s Creditworthiness

According to recent reports, unpaid invoices and late payments are on the rise, with businesses waiting an average of 72 days to be paid. Credit is the lifeblood of B2B sales, and payments can be late, leaving you with no choice but to pay your vendors late due to financial management issues. Payment delays trigger issues that have an impact on your company’s ability to trade, and this can result in several weeks of administrative work tracking down unpaid payments. This frustrates your cash flow and your ability to forecast future cash receipts.

Although it may sound like a well-worn phrase, “Cash is King” for any business. A regular flow of payments is important for the success of the business. Now the tricky question is how do you ensure that your debtors pay your invoices on time and what are the most suitable methods for keeping on top of payment arrangements?

The answer is simple | identify a customer’s creditworthiness before extending credit. This is the best way to lower your financial risk for the lifetime of your business relationship. Remember you need to gain insight into your customer’s creditworthiness before signing your contract. That way you protect your business. You then secure the business by getting a reliable picture of your customer’s financial standing.

Needless to say, you need to associate with the right business prospects to build a customer community with the ability to pay you and the financials to support the amount of credit you are prepared to extend. To do this you need to screen the creditworthiness of your customers before extending any credit. And if you’re still wondering what creditworthiness means, then think of a customer who has a sound paying capacity to pay for your product or service before you extend trade credit. That’s the definition and that’s what you need to check on all your customers, both new and existing. As within all things in running your business it’s a process.

So here are our

Top 3 tips for building a strong process to check the credit of your new and existing customers

TIP #1 | Use Shergroup’s Credit Report Product

Use Shergroup’s own Credit Report service found on our website at to credit check your new

B2B customer before you extend credit terms. Our specialist service is staffed by credit professionals who built scorecards back in the day for some of the biggest names in credit. Today they use that experience to give a more personal and intuitive service to the creditworthiness of a UK business. In a carefully curated report, you will understand in plain English the real trading position of a potential new customer so you can make an informed decision about the amount of credit you can offer based on their trading performance. Your Credit Check report will be made based on current information for the month you submit it meaning you have a credit check in “real-time”.

Shergroup’s Credit Check covers |

BASIC INFORMATION | such as checking the company registration number, year of incorporation and net worth. It will also tell you the age of the last filed accounts.

STRUCTURE AND OWNERSHIP | The report will then move on to the structure and ownership of the business including connected businesses. It will confirm the company number of all these connected companies and the date of the last filed accounts.

Our TEAM then offer an insight into the trading status of the company, how it was formed, whether it was a phoenix company before, and what potential pipelines for business it has in the future. All this insight can help inform you about the extent of the new customer’s creditworthiness but also offer commercial insight for more opportunities.

SCORECARD | Our scorecard puts all this data and insight into the perspective and is unique for each report. It will look something like this |

Scores are all on a range of 1 – 100 where 100 is the lowest risk. The highest risk is in the range 1-10, and we also closely monitor higher risk cases in the range 11-20.
Any cells that turn red indicate pro forma credit terms are recommended which means getting payment upfront before you supply goods and/or services to your customer.

OTHER RISK INDICATORS | such as debentures, losses, management changes and changes to the financial year-end are all highlighted.

KEY FINANCIALS | including the figures for the latest sales, fixed assets, current assets, current liabilities, working capital, long term liabilities, net worth and liquidity are all summarised in an easy to read table – as set out above. Our experts will give you a commentary on these financials, which again will help you put them into perspective.

THE CONCLUSION | Finally, the report will include our expert TEAM’s conclusion on the likely risk you face in trading with a customer. For example, in one such report, our experts concluded “the opportunity to trade with [X} beyond any very small level of the contract is a leap in the dark”.

The report may go on to suggest who our client should contract with – which may be a different part of the entity who you want to do business with.

In a nutshell, these reports are designed to distil all the financial information you can curate about a prospective customer, or an existing customer, and give you a readable and straightforward analysis of the business risk to your business in doing business.

TIP #2 | Ask for Bank References

You can ask your customer’s bank for a reference and for a minimum fee, you can find out as much as the bank is prepared to share about its customer with you. The bank will probably be able to confirm how long your prospective customer has been a customer of the bank. If a customer is prepared to offer a bank reference, then this is a good sign that the customer has a good relationship with their bank and is prepared to share this information.

Look at this type of information as a building block to creating a community of strong financial profiled customers.

TIP #3 | Supplier References

Another good way to get a real insight into your customer’s creditworthiness is to ask for Supplier References from your customer’s current suppliers. Their information is first-hand and is a good indicator of your customer’s ability to pay both them and you! Play smart and ask for multiple supplier references so that potential customers cannot trick you with providing only a happy supplier’s reference.


Taking all these 3 TOP TIPS together will mean you have an objective credit checking system that can be put in place across all your customer relationships.

Over time you may well conclude that some customers are better than others. Certainly, customers who pay on time and work with you to meet their payment terms are customers you will want to cultivate.
The TOP 3 TIPS will also show you the customers you are tolerating. They pay when they like, they think they have you over a barrel, and they actually cost you money in terms of chasing them for payment. Look to identify these customers and weed them out of your customer community. Replace them with customers who have good credit scores and strong references.

Use Shergroup’s service to credit check your potential B2B customers before making a decision about extending credit. This cost-effective service has been designed with you in mind so that the challenge is off your desk on what you decide. Our expert TEAM will prepare the report as outlined above with all the credit-related information to check the real trading position of NEW and EXISTING customers.
To get started on improving the creditworthiness of your entire customer community, or just one new customer at a time, contact us today @ [email protected]. Remember – we’re minding your business so you can do something more interesting!

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Last updated | 19 July 2023

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