Managing Risk - Information is Power

Avoiding bad debt or fraud increasingly means knowing your customers and the people behind the businesses, and gathering, collating and monitoring information about prospective and established customers alike.

Data can be collected from various sources - new account opening forms, credit reference and government agencies, sales and marketing personnel, customer contact centres, draft accounts, forecasts and Credit Circles – and the information gathering process should be ongoing, so that the picture of a customer’s financial stability is always up to date.

Obviously, checking the financial status of any prospective customer – however large or however well you know the individual or business involved – with a credit reference agency before trading commences is mandatory, but all of the data that can possibly be gathered from or about prospective and existing customers alike from all available sources needs to be carefully checked and verified regularly.

• A search of Companies House records for information on Limited Companies is something that most people do as a matter of course at the start of any new commercial relationship - but few monitor their customers regularly afterwards.

• Many people never bother to check electoral rolls for information about sole traders or the owners of non-limited businesses at the start of any commercial relationship - or even think to check the roll when things begin to go wrong.

• Whilst some people check The Register of Judgments, Orders and Fines, The Individual Insolvency Register and one of the many available debtor registers before deciding to issue proceedings against defaulting debtors, few make it part of their initial or ongoing information gathering process.

Making these checks initially and on an ongoing basis makes it easier to avoid fraud and respond to changes affecting customers’ status appropriately - to change collection strategies, revise terms of payment, or (worse case scenario) close the account.