Businesses are encouraged to credit check their customers to combat the risk of bad debt

Tougher economic conditions inevitably bring about a greater need for businesses to stay close to their customers, to ensure vital relationships are maintained and allow any cash flow issues to be identified and overcome.

There are several ways in which firms can gain a deeper knowledge and understanding of their prospective and current client base, including carrying out simple online searches, conducting a check at www.companieshouse.co.uk if it is a limited company and examining the business’ credit report.

Another key factor in effective credit management is establishing a system of credit checking a firm before you sign an agreement and progress with an order.

As part of its commitment to providing a comprehensive range of solutions to help firms maintain a strong cash flow, Lloyds TSB Commercial Finance offers an online credit rating facility, Firstcheck, to enable businesses to identify any risks in their client base.

New and existing users of Lloyds TSB Commercial Finance’s products can use the system to obtain credit information on an unlimited number of potential and existing customers.

The service provides credit checks on 3.5 million UK firms and can be used to determine payment terms or credit limits for new clients. It also evaluates and reports current business payment performance data gathered from a daily invoice flow through Lloyds TSB Commercial Finance’s factoring operations, which is one of the biggest in the UK.

Martin Walmsley, head of debtor insurance at Lloyds TSB Commercial Finance, said: “You wouldn’t give cash to a stranger, or carry out a merger or acquisition without conducting due diligence, so you shouldn’t extend credit to a company which you don’t know the history of.

“More knowledge means less risk and regular credit checking enables a company to spot any irregularities within their existing client base and make contingency plans to deal with any defaults.

“Firstcheck also provides important peace of mind by enabling firms to assess the credit worthiness of new customers before they enter into any agreements.

“At Lloyds TSB Commercial Finance, we are committed to helping businesses identify any cash flow issues before they become a potential bad debt. Firstcheck is a strategic tool to allow its users to understand payment trends in their industry, and complements our other products such as debtor insurance.”

Lloyds TSB Commercial Finance aims to complete 70 per cent of credit check requests within 40 minutes, with the remainder conducted within 48 hours.