Safe payment terms for a first order with a new company
How to set terms on a first order so you don't get burned, matched to the risk.
The first order is where you set the rules
When a new customer places their first order, you're deciding how much of your own money to put at risk. Offer 30-day terms to the wrong company and you could be chasing an invoice that never gets paid, or worse, delivering goods to a business that folds the following month. The trick is to match your payment terms to the risk, and the public record tells you most of what you need to size that risk before you commit.
Match the terms to the company
Think of it as a sliding scale from "payment up front" to "open credit", and let the company's public record place them on it.
If the company looks solid, active, years of trading, accounts filed on time, stable ownership, no notices, then standard terms are reasonable. A first order on 30-day terms, or a modest credit limit you're comfortable losing, is normal business. You can always extend once they've paid you cleanly a couple of times.
If you see mild flags, a young company, one late set of accounts, a recent change of directors, then don't refuse the order, size it down. A common approach is part-payment up front (say 50% with the order, balance on delivery), a small first-order credit limit, or pro-forma (payment before dispatch) until they've proven reliable. Keep the first exposure to an amount you could write off without it hurting.
If you see hard flags, an active winding-up petition, the company in liquidation, a director banned from running companies, then the safe answer is payment in full up front, or decline the order. Extending credit to a company already showing insolvency signals is how suppliers end up as unsecured creditors, near the back of the queue, if it fails.
A simple first-order policy
- Always get the registered company name and number, and check the status is Active.
- Default to part-payment or pro-forma on a first order with any company you can't clearly verify.
- Set a written credit limit for new accounts and don't exceed it until they've paid on time.
- Re-check before you extend terms. A company that was fine six months ago can change, especially if their accounts have since gone overdue.
- Keep the paperwork, a clear order confirmation and terms give you a much stronger position if you ever have to chase.
Why "can they pay?" isn't the whole question
A credit score tries to answer "can they pay?". Useful, but it's blind to the other half: who is actually behind this company, and are they who they say they are? A director banned by a court, or one with a trail of failed companies, is exactly the situation where an invoice quietly goes unpaid, and none of that shows up in a payment score. Checking the people and the public-record signals alongside the finances gives you the fuller picture before you set terms.
This is general guidance from the public record, not advice on your specific customer, the decision on terms is yours.
Set terms with the facts in front of you
Before you agree terms on a first order, check the company free, you'll get a plain safe / caution / avoid verdict with the reasons, so you can pitch your terms to the real risk instead of guessing.
Setting terms for a new customer? Check their public record first.
Check a company free →