Choosing the right company to forge a business relationship with is a critical process not to be taken lightly. Getting it wrong can have serious consequences. From late paying customers eating into your cashflow to poor suppliers affecting the fulfilment of orders etc. Prior checks to ensure that you’re dealing with the right company will keep you in control.
What is customer acceptance?
Business acceptance is the due diligence process for screening whether you ought to be doing business with a company or not. Some may argue that a simple, yet effective compant credit report is the key to the decision making process. Rightly so, it’s certainly a great starting point.
By undertaking a company credit report, you’ll be able to make a judgement call based on well-informed data. Most company credit reports will flag up any areas of concern for you to pay close attention to, when deciding on whether to take on the company on your records.
Why is customer acceptance so important?
Suppose that a customer fails to pay an invoice amounting to 2,000 euros. At a 5% margin, this means it has to generate an extra 40,000 euros in revenue to compensate for this loss. This increases as your margin decreases. If the margin is only 2%, you need as much as 100,000 euros in extra sales; assuming that nothing else goes wrong along the process.
Bad debt may therefore get you in a spot of bother if taken lightly. After all, if you are not receiving enough money from your customers, you need to find other resources to pay your suppliers. Financing that will in turn cost money. This is why you should deal with customers who are actually worth doing business with.
The salesperson will pocket a higher commission if they spent less time having to deal with ‘bad payees' who don’t pay on time. Avoiding late payees means less time on administration as far as chasing outstanding debts and a lot more time on generating new business!
Which data support your acceptance process?
A company’s annual financial statements is a key source of information if you want to do screen a company’s financial health. The disadvantage is that they’re often outdated due to the nature of the filing process. It is just a snapshot, adorned with the necessary accounting cosmetics. Furthermore, many companies based on their status' aren’t necessarily required to file their statements. Instead, a company credit report from Graydon acts as a one stop shop for making business acceptance decisions. Data from a variety of sources are combined into a single detailed credit report.
If you are looking for details about a European company, you will probably be fine using the online international network. Several European countries are connected to this, offering their information 24/7 online. The reports - complete, compact or credit advice - all have the same look and feel. This means that each partner translates the locally available information into uniform scores and ratios, greatly simplifying international comparisons of companies.
Graydon can rely on its worldwide network of partners with excellent knowledge of the local market. They will provide an accurate impression of the credit rating of your international customer.
What traps should I avoid?
When interpreting credit reports, it requires an element of analysis and judgement and cannot be taken on face value.
- High supplier payables does not mean in all cases that the company is unable or unwilling to pay. The customer may have negotiated excellent payment terms with its suppliers due to reliability.
- A benchmark with the sector may put statistics that may at first seem weak in a very different light.
- The credit advice is not always completely indicative of payment behaviour. Also check payment behaviour in previous quarters. How did it evolve? Perhaps there is a positive development.
Graydon has a team of specialists ready to assist you in interpreting all national and international data and the eventual acceptance process.
Automating customer acceptance
If you have a large portfolio of customers, checking and interpreting information on every single customer is very time-consuming. Build your own unique decision models by integrating Graydon’s business intelligence into your systems and automating your acceptance process. Rather than the reliance on company credit reports, you’ll create a fully automated and robust customer acceptance platform. This will save time, mitigate human error and reduce the effects of late payment to a minimum.
Find out more about monitoring.