How Credit Checks Can Reduce Risk in B2B Transactions
The acronym ‘B2B’ stands for ‘business-to-business’, which Investopedia describes as “a form of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer”.
In this respect, ‘B2B’ differs significantly from ‘B2C’ (business-to-consumer), where a company sells to an individual consumer rather than another business. One high-profile example of a B2B relationship is that between Apple and Samsung, where the latter provides components for iPhones.
B2B deals also differ from B2C transactions in that the former tend to see larger amounts of money changing hands. Hence, most B2B products and services are bought on credit, with the buyer not actually paying in full until further down the line.
So, if your company is considering selling a product or service to another business, you should undertake a B2B credit check. Here are several reasons why doing so can help to mitigate risk...
You can watch out for ‘red flags’
If a B2B client fails to pay your business on time, your cash flow could be significantly disrupted. After all, you are bound to have many overheads you need to keep paying for — such as rent, heating and supplies. Would you be able to plug the gap if a client falls behind with payment?
Worse, the client could potentially go out of business before getting around to paying you. If this does happen, you won’t be able to get hold of the money at all.
So, before agreeing to a given B2B transaction, check the prospective client’s credit file. You could spot a few warning signs that they are in financial trouble. For example, are they currently saddled with outstanding debts? Have they recently been subjected to CCJs (County Court Judgements)?
If the business does have a besmirched credit history, you could back out of the proposed deal and look for an alternative client you deem less likely to default on payments.
You can save precious time and resources
If you want to run a B2B credit check on a limited company located in the UK, we offer ready access to an online system that would allow you to quickly and easily make that check. We can also help you to do likewise if the target business is based in any of the following countries:
- Belgium
- Czech Republic
- Denmark
- Finland
- France
- Germany
- Italy
- Liechtenstein
- Lithuania
- Luxembourg
- Malta
- The Netherlands
- Norway
- Poland
- Portugal
- Slovakia
- Spain
- Sweden
- Switzerland
- United States of America
Not listed above are a further 25 countries from which we can fetch corporate credit reports, albeit on an offline basis. Still, you will be able to get the results within 24 hours of submitting your request.
Our online shop enables you to buy credit checks individually or in batches of 10, 25 or even 50. Going down the batch route can prove the more cost-effective strategy if you are eager to sign a high number of B2B contracts within the next 12 months.
Ultimately, our credit management company can aid you in saving time and money on not only the credit checks but also the actual B2B transactions you make.
That’s because dealing only with businesses you have established to be financially sound can reduce the likelihood of you encountering unexpected financial issues.
Naturally, it would take time out of your day if you had to renegotiate payment terms with a company that found itself struggling to meet them. The client could even decide to axe their partnership with you altogether, potentially forcing you to look for a replacement client.
You can avoid damage to your company’s reputation
You have to remember that if a business is financially flailing, it could be due to the organisation pursuing a dodgy — perhaps even immoral — business model. So, if word about the company’s nefarious dealings got out, a torrent of negative publicity could financially sink the firm.
Now, imagine what the consequences could be for your own company if it happens to be in a B2B partnership with this other business at the time. We have already mentioned why the client going bust could be a big problem for you, but you could also get tainted by the client’s bad reputation.
That’s not the kind of damage you would be able to quickly recover from. On the contrary, more and more people could decide against buying from your business — possibly leading it into a financial crisis of its own eventually.
Want more insights into how a B2B credit check can help lay the groundwork for corporate success? You are welcome to reach out to our credit management specialists by calling 01992 414222.
