How trustworthy are your new customers really?

In the business world, the decision to work with new customers is an important step - it can make the difference between the success or failure of a project. It's not just about signing a contract, it's also about making sure the customer can make the agreed payments. In our YouTube video "How trustworthy are your new customers really?", we shed light on the central role of credit checks and show how entrepreneurs can better manage risks.
Why is a credit check so important?

If a new customer doesn't pay their invoices, this has a direct impact on your company's liquidity. For small and medium-sized companies in particular, a single payment default can cause major financial problems. It is therefore crucial to ensure that the customer is solvent before signing a contract. This is where the credit check comes into play: it helps you to assess your customer's payment history and financial stability and minimize risks.

 

General methods of credit assessment

There are various ways to check the creditworthiness of a potential new customer. These methods are available to companies of all sizes and can be customized:
Credit reports from specialized providers:

There are many service providers that offer credit reports. Providers such as Schufa, Creditreform or Bürgel are well-known names that provide comprehensive information on the creditworthiness of private individuals and companies. These reports are based on a variety of data, including payment histories, existing debts and general financial stability. With solid credit reports, you can quickly assess whether a customer is trustworthy.

Using publicly available information:

For larger companies, annual reports, balance sheets or other publicly available financial documents are often a valuable source. These reports provide insights into the economic situation of the company and allow a rough assessment of whether the company is financially stable enough to meet its obligations.

Direct communication:

For smaller companies or private customers, a direct conversation can also provide information about solvency. Ask for references or a payment plan. An open discussion can not only dispel concerns, but also build trust.

Gain your own experience:

If you have already completed a smaller transaction with a new customer, you can gather valuable information from this first deal. Punctual payments indicate a solid customer, while late or non-payment can be a warning sign.

What to do if the credit check raises doubts:

If the results of the credit check are negative or there are uncertainties, you should consider additional security measures:

    Prepayment: Insist on prepayment if the customer is a high risk. This will minimize the risk of non-payment from the outset.

    Partial payments: You can also agree partial payments in advance. This means you don't bear the entire risk and the customer doesn't have to pay the full amount at once.
    Contractual safeguards: Guarantees or collateral can be further measures to protect you from financial losses in case of doubt.

Support from professional partners

For companies that regularly have to acquire new customers and carry out credit checks, it can make sense to bring in a professional partner. The Diagonal Group, for example, offers comprehensive services in the field of credit checks and receivables management. They help companies to analyze credit risks and ensure that new customers are reliable. This type of support can be particularly valuable for growing companies that want to focus their internal resources on their core business instead of investing a lot of time in risk management.
Conclusion: Credit checks as a protective shield

Whether you check your customers' creditworthiness yourself or use the services of a specialized provider like Diagonal Group, credit checks are an essential step in minimizing your company's financial risks. It protects you from payment defaults and ensures that you work with reliable customers.

Watch our YouTube video "How trustworthy are your new customers really?" for more practical tips and insights on how to assess your customers' creditworthiness and what measures are suitable for securing your business relationships.