To quote the oft repeated phrase “a sale is not a sale until it is paid for”.

Being realistic though, all businesses, and in particular SME’s have to take calculated risks with credit from time to time. However any risks should be based on the potential of a profitable return and they should be educated risks.

There is little point in being turnover rich, profit poor. Equally there is no value to be had having many suppliers that end up in credit notes or write-offs. A balanced common sense approach is always the answer.

Visit your clients and customers and gauge their enthusiasm about their own business but as mentioned in previous articles do find out why each new customer is considering giving their business to you.

Taking a credit report and doing as much digging as you can using resources such as the Register of Outstanding Invoices is vital. Every day claims for huge sums that end up in write offs, are brought to solicitors and debt collection agencies by clients chasing customers with many major warning signs including numerous court judgements recorded against them - how can this possibly happen?

The answer almost always lies in supplier ignorance and incompetence.

Sometimes this is because a supplier failed to take a credit report or set up adequate credit management systems – all for the sake of saving a few pounds in either purchasing a credit report or monitoring their customers through such means.

It’s a hard and expensive lesson to many. If it has happened to you before it is time to change.

Address it properly now.

Keep a watchful eye on the orders you are receiving to ensure they are profitable and not being dispatched to parties unlikely to pay you.

Be prepared to turn down new credit account applications from companies that would not get a credit limit elsewhere and offer them pro-forma only - they may be used to this.

Be prepared to withdraw /or reduce credit facilities with already established customers if their credit rating goes down or detrimental information is filed against them for any reason - a bank would not hesitate to do so and neither should you. You can make it easier on yourself by blaming your ‘credit insurance company’ or ‘the bank’ for the decision if you wish to perhaps make it a little less personal.

With acknowledgements once again to Ken Brown of