A new customer wants credit terms, should you say yes?
How to decide whether to invoice a new customer on terms, using the public record.
Offering credit is lending your customer money
When a new customer asks to be invoiced on terms, "we'll pay you in 30 days", they're asking you to lend them the value of the goods or work, interest-free, on trust. Sometimes that's exactly how business is done and turning it down costs you the sale. Other times you're extending credit to a company that's already struggling, and 30 days later you're chasing money that isn't there. The decision comes down to two questions the public record helps you answer: can they pay, and are they who they say they are?
How to decide
Start with who's asking. Get the registered company name and the eight-digit number, and confirm it's "Active". If they're a sole trader rather than a limited company, the risk profile is different (there's no company to hide behind, but also fewer public accounts to check). If they won't give a company number at all, be wary of extending any credit.
Then look at the financial picture. Are the accounts filed and up to date? Overdue accounts are a classic early sign of a business under strain, precisely when you don't want to be their unpaid creditor. If the filed accounts show the company owes more than it owns (negative net assets), or a run of falling net assets year on year, that's real weight against open credit.
Then check the people and the notices. Is there a director banned from running companies, or one with a trail of dissolved businesses in the same trade? Is there a winding-up petition or insolvency notice in The Gazette? Any of these turns "invoice on 30 days" into a bad idea, other creditors may already be circling, and unsecured suppliers are near the back of the queue when a company fails.
The scale of sensible answers
- Clean record, established company, a modest credit limit on standard terms is reasonable. Grow it as they prove reliable.
- Young or mildly flagged, start with pro-forma or part-payment, and offer a small credit limit only after they've paid you on time once or twice.
- Hard flags (insolvency signals, disqualified director), don't offer credit. Ask for payment up front, or decline. If you must proceed, keep the exposure to what you could afford to write off.
Protect yourself either way
Whatever you decide, set a written credit limit for the account and don't let it creep up unnoticed. Invoice promptly and clearly. Keep the order confirmation and your terms of business, they give you a far stronger hand if you ever have to chase or take action. And re-check the company before you increase a limit; a customer who was solid a few months ago can slide, and their accounts going overdue is your cue to tighten up. This is general guidance from the public record, not advice on your specific customer, the decision is yours.
Make the call with the facts
Before you say yes to credit terms, check the company free. You'll get a plain safe / caution / avoid verdict with the reasons, including the director and insolvency signals a payment score alone won't show, so you can decide with your eyes open.
A customer wants terms? Check their public record before you agree.
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