Not getting paid for goods or services you have provided to a customer is one of the most frustrating commercial experiences possible.
In some circumstances, it might be due to some form of commercial dispute or customer dissatisfaction but in many cases it is simply because the customer is unwilling or unable to pay due to their own financial difficulties.
In reality, there may be little or nothing you can do that will guarantee to avoid all such problems but you may have several options open to you including credit checks and debt purchase.
Credit reference checks
There are a number of online agencies who will allow you access to their records in order to check the financial history status of a given individual or company.
These records contain details of the past financial behaviours of the person or people concerned, covering their dealings with numbers of other companies.
These services are typically chargeable but you may be able to get funding in order to help set up your account through companies such as wongaforbusiness and others.
Space limitations here don’t permit a detailed discussion as to how these systems work or how you would interpret what they are telling you – that would be made clear by the service providers.
Essentially they will provide you with an indication of the risks you will be taking by offering credit to the company or individual you are considering doing business with. For example, you may be able to see that they have a history of county court judgments against them for unpaid bills or a background of making late payments against credit cards and bank loans.
You are then free to choose whether or not to deal with your potential new customer and if you do, under what terms – perhaps including cash in advance.
Factoring and debt purchase
There are also companies that specialise in essentially purchasing your invoices and debt from you.
Basically, in return for a fee or percentage of the total invoice value, they will pay you and take on the responsibilities and risks associated with recovering the sums due directly from your customer.
For the small business, bad debt is a major nightmare.
Identifying its potential sources, in advance, then sidestepping them, might be an important factor in your survival and eventual success.