Small Businesses Benefit from Background Credit Checks

Even the most cursory background credit checks will help most businesses avoid bad-debt losses, yet many business don't even use the free resources online.  If you're in the business of extending credit to customers for a significant portion of your business then you would do well to conduct careful background credit checks to be certain your customers are credit-worthy.

Does You Business Do a Lot of Sales But Always Run Short on Cash?
While your profit and loss statement may indicate you made a lot of money in 2008, did you have a large amount of unpaid accounts? What does your bank account balance say? If you find that you're consistently running just over broke in your bank account but you've got consistent business then maybe your accounts receivable are at fault.

Things to Help You Manage Your Credit Customers
There are a few things you should do when you suspect your credit customers are not keeping up with their accounts.

1. Conduct a thorough review of your customer account balances. Did you make any billing mistakes? Have you accurately recorded all your work / invoices in your customers accounts?

2. Have you accurately invoiced your customers for all work performed? Prepare a statement of account for each of your customers and mail it to them and include a return envelope for payment.

3. Make courtesy calls to customers who are late in paying. Be courteous - many times bills get honestly misplaced or sit on tables and counter tops un-mailed. If you've been delinquent in keeping up with your collections, give your customers the benefit of the doubt on your first call.

4. Repeat this process consistently until your accounts in collection is brought down. Once you've gotten your accounts in order you should be able to maintain it with consistent billing practices and sending out statements of account monthly.

5. If you are still having issues or are in the habit of extending large amounts of credit for extended periods, it may be worth considering using background credit checks as part of your new applicant process.

6. If you do decide to add background credit checks to your business process, you may wish to request current customers submit new credit applications. This can be an extremely touchy subject, but if you're extending large amounts of credit, your good customers will understand that these days background credit checks are necessary to continue to be in business and provide good service long term. Customers who refuse to submit to background credit checks may not be worth your time anyway.