Minimize Credit Risks from Your Clients

One of the most important things you can do as a business is to make sure that you are the kind of business a lender is interested in providing financing to. One of the most important things that lenders look for is your payment history. While there is a lot you can do to make sure that you are paying on time, there are instances in which your payment is hindered by money owed to you.

If your clients are slow paying you, then you could be slow paying your own vendors, or making payments on a business loan. Without the necessary cash flow, you can’t meet your own obligations. This means that slow paying clients can actually become a credit risk. You will want to minimize the risk, so it is important to check on prospective partners and large clients.

One thing you can do is get the business profiles on large potential customers. Dun & Bradstreet provides these, and you can get them from business credit agencies like Experian. You can also ask for credit references, and check with others that have done business with the company. You want to make sure that you are dealing with someone who is likely to pay on time.

In order to encourage prompt payment, you should invoice clients immediately. Also, in some cases, you can ask for half of the total up front in order to ensure that you have something prior to the final payment. Another option is to consider accepting credit card payments from your clients. While you do increase the chances of charge backs and fees, you can also reduce the chances of late payments. Automatic billing to the client’s credit card can ensure that your cash keeps moving a little more freely through the system.

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