Provide credit with caution

The euro zone crisis heavily affected our export trade and as a result the government had to introduce, what many feel to be, severe austerity measures to try to clear the country’s deficit. However, many economists feel that the Chancellor, George Osborne’s steps have been largely successful so far in achieving their aim but they also feel that maybe now is the time to loosen the purse strings slightly to encourage faster growth of our economy.  There have been calls for the government to create a state-funded financial enterprise that lends specifically to businesses to generate growth and get credit flowing but as yet this institution has not materialised.

The British Chamber of Commerce (BCC) have reduced their growth forecast figures for 2012 from 0.6% to just 0.1%, a major decrease.  The BCC expect the economy to remain in recession for at least another quarter.

So, what does all this mean for your business?  Well, it means that you have to continue to watch every penny you spend but also every penny you lend. 

If you are still giving credit to new customers with no knowledge of their credit status you are taking a huge risk. If a customer comes to you asking for any amount of credit, especially if it’s just a small amount, make sure you take a copy of their driving licence or passport and that you have a copy of a recent utility bill to prove their address.  You might think that these measures are not practicable for your business but surely you would expect to show proof of identity and address if you were buying something on credit?  I give this advice to all of my business clients and as a result of this simple step their credit flow is far more liquid than it once was. 

Many small businesses have been run by the same families for generations and they have a great working relationship with their existing clients.  This is fantastic and long may it continue, but remember, you cannot rely on new customers in the same way as you do with those you have dealt with for many years.  A new customer should expect to give you information in exchange for credit so make sure you get proof of identity and address from them.  If, once your new customer has taken delivery of the items purchased from you, they do not pay, you will have on your file all the information you need to take the matter further and pursue the debtor through the civil court system.

It is not pleasant to think of people intentionally deceiving you but it is a reality and something you need to protect yourself from.