Telling the truth about SME life today

Knowing your customer

Unless you know exactly who you’re trading with, you won’t be able to check if they are good for the amount of credit you need to grant, you won’t be able to commence legal action effectively if it becomes necessary.

Can you answer yes to all these questions”

  • Do you know the exact name and trading style of the business” The people or company that own the business, and are liable for any debts, may not be the same as the name under which the business trades. Types of business include, amongst others, limited companies, partnerships and sole proprietors.
  • If it’s not a limited company do you know the name(s) and personal address(es) of the proprietor or partners?
  • Have you seen headed paper or documentation that verifies this information?
  • Have you used a credit reference agency to check their details and credit status?
  • Does the information support the amount of credit they?ll need There are many sources of information, the most common and readily available being credit agency reports and references.
  • Have you talked to other suppliers of the business to obtain references?
  • Do the details on the order match those you were given earlier?
  • If they were previously dealing with your competitor, are you happy about their reasons for coming to you?

Five top tips

1. Check out the exact name and legal status of the business you’re supplying. If it’s a sole trader or partnership, the proprietor or partners are personally liable so make sure you have their full details. Businesses can disappear much more quickly and easily than individuals!

For limited companies you can undertake a free check on a limited company’s basic details using the Companies House WebCheck service.

2. Don?t be afraid to push for all the information you need if you can’t get it now, it will be far more difficult later.

3. Watch out for “friendly” references that the potential customer gives you. Referees that you choose are far more effective.

4. Invest in credit reference information it could save you a bad debt.

5. Set some rules that you (and all your employees) always follow and don’t be tempted to break them, even if you’re put under pressure to supply urgently.

This guide was written for BIS by Philip King, chief executive of the Institute of Credit Management (ICM). For more information about ICM visit

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