Know your customer
I run a small business. We’ve been going for a year and have just received our biggest order from a new customer. It could provide a big boost to our business, and I’m going to need to take on another employee. I understand that this new customer is a big company in the south of England who seem quite well known. I’ve sent them my terms of business but I’ve not had confirmation from them that they’re acceptable, and I’m being pushed to start work.
Just take a minute to review the situation. You don’t know this new customer at all. It’s important that you get the relationship off on the right footing and even more important that you get paid for your product. If they are a big company they will be used dealing with suppliers’ terms and conditions. The best thing might be to give them a ring and find out who will be dealing with your account, and how they expect to deal with payment of your invoices. Ask them to either confirm that they’re happy with your terms and conditions or to advise what changes they might require.
Given that you’ve had your biggest order, it could be a good time to invest in some professional advice. A decent solicitor will be able to spot any potential problems with your business’ terms and conditions before they arise. This shouldn’t be too expensive – ask for a fixed fee.
Ideally, your terms and conditions should include the provision that you will use credit referencing agencies, and that by signing them your customer is providing you with their authority for you to carry out a credit check on them. Again it’s important that you get to know your customer in this regard. Who are you dealing with? If it’s a limited company, who are the directors? If it’s a sole trader, what is their home address?
If your customer is trading as a limited company, a credit reference agency will be able to confirm whether that company is solvent. If it isn’t then you need to consider taking further steps before staring work for them. One such step would be to obtain a guarantee from one or more of the directors. Try to resist the temptation to start processing an order for this new customer until the agreed terms and conditions are in place. Also, don’t think that just because the new customer is a big company you don’t need to carry out a credit check. There are plenty of big companies experiencing financial problems. Having a personal guarantee from one of the directors may mean that you get paid rather than being left as an unsecured creditor in an insolvency situation. It could save a lot of hassle further down the line if there is a problem with getting payment.
