Credit checks are an important part of getting to know your customers. Running a credit check will help you understand your customers’ financial position and give you confidence that they are able to pay their invoices on time.
Credit checking software, like Satago, provides you with details such as your customers’ credit rating, financial position and the average time it takes them to pay suppliers. This information will help you decide your customers’ payment terms and credit limit and help protect your business from late payments and bad debt.
With £23.4bn currently owed to businesses across the UK in late invoices, it's crucial that business owners use credit checking software to protect themselves. Failing to run credit checks on customers could land you with a sales ledger full of late and unpaid invoices, putting pressure on your business’ cashflow and your peace of mind.
Follow these simple steps to run a credit check on a new or existing customer using Satago.
1) If you haven’t already, sign up to Satago and create your account.
2) Connect your accounting software in a few clicks.
3) Now you’re set up on the platform, navigate to Risk Insight > Credit Search.
4) Type the name of the company you wish to credit check into the search bar.
5) Click ‘View company page’ to see a credit summary.
Satago’s credit summaries provide an overview of your customer’s financial position, including their risk band, credit score trend and average days beyond terms. The summary also includes a suggested credit limit; this is the maximum amount of money your customer should owe you at any given time.
Satago offers unlimited credit summaries on all subscription plans, so you can get a full overview of all your customers’ financial position. You will receive a notification if a client’s credit score changes or if they breach their credit limit.
Once you’ve viewed a customer’s credit summary, you can click to access a full credit report. The information in the credit report will give you a clear idea of your customer’s financial position and flag if they pose a risk to your business. It’s a good idea to run full credit reports on customers before you agree to offer them a significant amount of trade credit.
The information on a credit report includes:
Credit rating: A score between 1 and 100 which indicates their risk profile. The higher risk a company is, the more likely it is that they will be unable to pay their invoices on time.
Commentary: A detailed explanation of their credit rating.
Trade payment information: The number of invoices paid after 30 days and their average days beyond payment terms.
Financials: Their balance sheet, profit/loss, capital and reserves, net worth and working capital.
Directors and shareholders: A list of shareholders and people in key corporate positions.
County court judgements: A record of county court judgements that have been brought against them due to late or non-payment of invoices.
Below are some examples of how you can use credit searches to inform your everyday business decisions:
Offering trade credit to a new customer — check their credit rating and trade payment information. If they are high risk, avoid offering them trade credit. If they are moderate risk, find out why in the commentary and keep to their suggested credit limit. If there are red flags such as county court judgements or poor financials, you may choose not to do business with this company.
Deciding payment terms — check your customer’s credit rating and trade credit information to determine their financials and the number of invoices paid after 30 days. If they often pay invoices late, you can give them shorter payment terms to encourage faster payment or ask for upfront payment or part payment.
A customer breaches their credit limit — Satago will notify you if a customer breaches their credit limit. When this happens, you should avoid offering the customer further credit until they have paid some of their outstanding invoices.
Monitoring existing customers — customers can move from a low-risk into a high-risk bracket due to changing financial circumstances. Continue to monitor customers over time and do not continue to offer credit if they are at risk on late or non-payment.
Even if a customer is financially able to pay their invoices on time, there is no guarantee that they will. Use Satago’s automated credit control tool to encourage faster payment.
Satago integrates with your email provider and sends automated payment reminders, monthly statements and thank you emails to customers from your own email address. Ensuring you get paid on time and maintain great customer relationships.