SMEs need to get serious about customer risk


As any small and medium enterprise (SME) owner knows, risk is a constant factor in business. Changes in a company’s credit profile and internal movements can happen at any time without external parties being made aware, and can leave suppliers exposed.

To mitigate this, businesses can run a credit report on their partners, suppliers or customers in order to gain a better understanding of the risk they pose.

However, credit reports aren’t on the radar for most small and medium business owners, who are unaware of the credit risk of their customers. This is understandable – SME owners are notoriously time-strapped and running a credit check can become just one more thing on a never-ending to-do list – but without a thorough understanding of how risky a client’s business is, SMEs are unable to make informed decisions that will protect them against greater risk exposure.


Moving away from 'set and forget'


When a company starts experiencing financial trouble, often the first thing it will do is stop paying its suppliers. It’s vital for suppliers to know who they’re doing business with, and how they are performing, throughout the business lifecycle to avoid unexpected late payments and getting trapped in the all-too-common cycle of poor cash flow that many small businesses experience.

Integrating credit reviews into your process, whether quarterly, annually or at regular milestones over the course of a long-term project, can protect you from unfavourable surprises. Running a SwiftCheck report is an easy way to determine if your customer’s situation has changed and whether you need to consider updating your payment terms, therefore protecting your business and ensuring there is no negative flow-on effect if a customer does enter a rough patch.

There are a number of simple steps SMEs can take if a customer’s report shows changes :

  1. Speak to your customer.  There may be a reasonable explanation for the changes and the problem can be resolved without any further action
  1. Think ahead. Managing your cash flow is important if a customer is going through a period of financial difficulty, and your level of cash flow may help inform the actions your own business should take.
  1. Review your other customers. . If any of them are also showing signs of financial difficulty this could also impact the action you take with regards to your payment terms.
  1. Adjust your payment terms. You may need to reduce the amount of time a client has to pay, or the credit limit available to them, to protect your own business and avoid causing a ripple effect amongst your professional network.


 Beyond risk reduction


Knowing if your customers’ risk profiles are changing provides more benefits than just avoiding risky situations and protecting cashflow – although these are critical to any business’ ongoing success.

What about when your customers are performing well and are actually getting less risky? This is the perfect opportunity to deepen your engagement with these well-performing customers, becoming partners in growth through extending terms, increasing limits, and so on. The more integrated your business is with your best performing customers, the better the opportunity for you both to benefit!


For more information on SwiftCheck reports, visit the Equifax website:

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The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.




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