Customers and clients seem to expect to be granted credit as a matter of course. As a small business owner, you can't afford to extend credit to everyone so it is vital that you perform customer credit checks to reduce your risk. After all, if he or she doesn't pay, you're the one that's out of pocket.
What happens if you don't credit check your customers?
Credit fraud costs businesses billions of dollars per year. Small businesses can be particularly vulnerable - a sale of an expensive piece of equipment or weeks or months of services provided to a customer who is then unable to pay can be financially devastating to a small business owner. Contractors and small businesses are often unaware that their clients are in financial difficulty until they find out that the client has gone bankrupt.
Many small business extend payment terms out of good faith or conduct a credit check by asking for references. This would be a great system in an ideal world where fraud didn't exist and all companies were responsible with their cashflows; unfortunately, this isn't reality. If this was reality, there wouldn't be a need to run credit checks in the first place.
The problem with using references as credit checks is that customers with less than perfect credit histories are familiar with the process and typically carefully selected their references so that you get only the polished version of their credit history when you inquire.
A credit report will give you the information you need to make a confident decision about whether or not to extend credit.
A Creditsafe credit report through will include a customer's historical payment data, bankruptcy records, any lawsuits, liens and court judgments against a company, a Risk Rating that predicts how likely a company is to be severely delinquent in the future, along with a DBT score to indicate how a company is currently paying its outstanding dues. A Creditsafe report provides you with all the information you need to make an intelligent decision about whether or not to extend credit and alleviate the risk of being burned financially.