While you may not want to take the time to perform a credit inquiry into a company over a small, one-time invoice, taking an active role in assessing potential client's creditworthiness is a critical goal of a successful company.
It may be tempting to accept that large order on good faith because you feel asking for credit references may hinder closing the deal, but it is a risk a small and growing business can not afford to take.
Credit references are common practice in industry and commerce, and asking for one does not imply a lack of trust. It is simply the prudent thing to do before accepting large orders from unknown customers.
Recently, a customer of ours accepted a deal with a company for approximately $30,000 in invoices to be billed in three stages. When the first invoice arrived at Prairie Business Credit, no credit work had been done on the customer.
As part of Prairie working guidelines, an invoice of this size for the company in question was automatically subject to a bank and trade inquiry.
This simple and standard form completed by Prairie's underwriting department uncovered that not only did the company have poor payment history, they currently did not have enough money to support the project.
While our customer was out the value of the first invoice, approximately $12,000, they were saved from a loss of nearly $30,000 by simple bank and trade references.
Although Prairie can not provide specific credit information on your clients, we are able to assist you in credit assessments and provide a recommendation to you as to what a credit limit we would assign them. This service is already included in the fee structure.
Getting in the habit of requesting bank and trade references on new deals is a practice that can help prevent financial devastation.
"This article talks about how the entrepreneurial road is sometimes a lonely one. Running a small business requires the entire team to be focused, and shielding that team from the rigamarole and the ups and downs can be necessary."
Dylan Morgan, Executive Vice President, Prairie Business Credit
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