How much do you really know about your customers?
Don’t be afraid to ask for all the information you need, to get to know your customer. Because if you can’t get it at the beginning of the relationship, what are your chances of getting it when things turn belly up?!
If you don’t know the legal name of the entity that you are trading with how can you possibly check their credit history.
Furthermore, you won’t be able to invoice them correctly, and it won’t be easy to start legal action if you need to.
- Try this: Pick an existing customer and ask yourself “Do I know the legal name and structure of this business”, (who owns it; is it a limited liability company, a partnership, sole trader. Who are the directors and or shareholders – what other liabilities do they have)?
Use the free Companies Office search box on Insolvency Watch and see how accurate you are!
- For an example: A member pointed out to us (Shark Patrol) that a particular company wasn’t listed on our database. It was fairly obvious to us that the ‘Company’ referred to was actually the franchise name. Our member had always known them as xyz K Road (names changed for legal reasons). The family that owned this franchise had a number of business interests, all with different but very similar Company names. Our member then preceded to check the company structure of all his clients – they were surprised to find out how little they really knew. Although to be fair, they inherited this customer base when they purchased the business!
- Lesson: The entity or person/s that own a business, and therefore liable for any debts, may not be the same as the name under which your customer trades.
You can’t know your customer if you don’t know their company Structure
We recommend that you bookmark Insolvency Watch and make use of their free Companies Office search option at the top of each page to Check the exact name and legal status of each of your business customers (you will need this if you ever have to take legal action to recover a debt).
You may also want to consider subscribing to Insolvency Watch so that you can better monitor your existing customer base.
Another question: For each and every customer that is not a limited liability company do you know the name/s and personal details (address, phone etc) of the owner or partner/s?
Or put another way: if the customer closed doors and walked away tomorrow, would you know where to start your search for them?
Customer provided references:
Ask for references and use them, ask questions like: would they trade again, do they consistently pay on time.
Do they have a web site? Have they included references from their ‘Happy’ customers or suppliers. This is public information, contact them and ask questions, and watch out for ‘Mates References’.
Don’t be afraid to ask for all the information you need, because if you can’t get it at the beginning of the relationship, what are your chances of getting it when things turn belly up?! Again watch out for ‘mates references’. These are often easy to pick, IF you ask the right questions.
And finally, ask yourself this “If they have been in business for a while, why have they left their current supplier in favour of you“. And are you convinced with their reason for doing so.
So how ell do you know your customer (s)?
Find out more about why credit checks are worth doing …