Before you offer a new UK customer credit or payment terms, it is worth understanding where the risk sits. A new account is, in effect, a short-term loan: you deliver now and trust the customer to pay later. Taking a little time to weigh how financially stable the company looks, whether it is already behind on what it owes others, and what kind of track record the people behind it have will not make that risk-free. It will tell you whether you are extending terms to a steady business or to one that is already under strain.
What follows is what to weigh, and how to let it shape the terms you offer. For the filings that tend to appear once a company is already under pressure, see the warning signs a company is in financial trouble.
A credit decision is rarely a clean yes or no. More often it is a question of how much room to give, and on what terms. Three things are worth weighing.
How stable the company looks. A business trading from a position of strength reads very differently from one whose figures show it owes more than it owns, or that has gone quiet and stopped reporting on time. You are looking for signs of strain, not certainty.
Whether it is already behind with others. Court judgments for unpaid debts, or heavy borrowing secured against the company's assets, both matter to you. They suggest other creditors are already chasing, and they leave less in the pot, and less room, for an unsecured supplier like you if things go wrong. The guide on how insolvent debts are paid explains where you would rank.
Who is behind it. The people running the company, and their track record. A director with a trail of failed companies, especially in the same trade, is worth pausing over. The guide on director disqualification covers the more serious end of that.
A customer with healthy figures, no judgments and a steady board is a different proposition from one already under strain, even if you decide to trade with both. What you find is less about whether to say yes and more about how much room to give.
Common ways suppliers limit their exposure to a higher-risk account include a smaller opening credit limit that grows as the customer proves reliable, a deposit or part-payment up front, shorter payment terms, a retention of title clause so you keep ownership of goods until they are paid for, and a personal guarantee from a director. These are tools that exist, not a recommendation for any particular customer. Which fit depends on the order and on what you found.
Here is the limit of any check done before you onboard a customer: it captures one moment. The customer who passes today can lose a major contract next quarter, fall behind, and drift toward insolvency, all after you have set the terms and started delivering. The signs of that appear afterwards, not at the point you checked.
Re-running the check by hand on every customer, every few weeks, is not realistic for most businesses. So the exposure quietly grows, and the first most suppliers hear of trouble is a missed payment or a letter from an administrator.
There are two ways to stay across your customers after the check. The difference is how early you want to know.
We can't stop a customer failing, but you will never be the last to know, and you will know you did all you could.
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