You have most likely heard the term vetting and not know exactly what it entails. This article will give a better understanding of what the vetting process entails and how it will benefit your company. This article will explain the process in the event of a new client completing a new credit application with your company.
How does one vet a potential client?
Check that the name of the entity:
If your new client is a company or a close corporation, check the CIPC and credit bureaus to ensure that the name given is accurate and the registration number given matches the name. Make sure to check that the company or close corporation’s status is “in business” and has not been deregistered or liquidated.
If your client is a sole proprietor, check his or her credit bureau report to ensure that the ID number matches, that he or she has no default listings or judgments against them.
Make sure that your credit application permits you to undertake the necessary credit bureau searches and checks.
Check the contact details
Your first port of call is to call the number provided in the credit application and preferably speak to a person other than the person who completed the credit application. Confirm the company’s address and other contact details with this person.
Google check the company
Google is an amazing tool in this process. A simple Google search of the company will tell you pretty much all that you need to know. Start with the client’s own website and confirm that the details on it match what you have on your credit application. If not, this should be investigated.
Your next port of call is to check for any complaints against the company. This will tell you a lot about the company’s payment habits and general work ethic.
Get references
Make sure that your credit application makes provision for business references. Include at least three references with whom the potential client has done at least one year of business. Call these references and enquire whether the potential client pays on time, whether they complain about goods and services, and what the nature of the complaints is. The nature of your business will guide you regarding the necessary questions and queries you should raise.
Do the financials check out?
Obtain a copy of at least three months of bank statements from your potential client. You will be able to draw the necessary inferences regarding the client’s payment potential and liquidity from this information.
It is always a good idea to request a deposit from any new client.
Get details of fixed assets
Request that your client informs you of any immovable assets that it owns, giving a full description and advising whether it is encumbered. This will help guide you regarding liquidity and also act as a potential executable asset should it ever come to that.
Is the company representative legitimate?
Ensure that the company representative who completed the documentation is listed in the CIPC details. If the representative is not a sole member or director, the application should be accompanied by a letter and company resolution authorizing him or her to act on behalf of the potential client.
You may obtain a credit bureau search on the representative to ensure that he or she is legitimately employed by the company and is not a false representative.
Make sure to obtain the necessary consent to check the representative’s credit bureau record.
What are the benefits of vetting potential clients?
- You will be able to see if your potential client is legitimately trading.
- You will immediately know if your client has a history of bad payment.
- Your risk of contracting with a bad payer is greatly minimized.
- The likelihood of entering a mutually beneficial business relationship is increased.
- When it becomes necessary to take legal action against your client, you will be in possession of the necessary information to best position yourself for success.
Remember, knowledge is power. Properly credit vetting clients ensures that most of your clients are good clients and minimizes your debtor’s liability. The foundation of a good vetting procedure is a well-drafted credit application, so make sure that you have this prepared by a professional.
Please contact us for more information in this regard.
