A fear of losing large sums of money through bad debt or late payment should be enough to convince any business of the value of pre-sales credit checking. Yet, according to timber trade credit specialist Status Credit Reports, many timber traders are not protecting themselves as much as they could do.

According to managing director Terri Cooksley, nowadays credit checking goes a lot further than the taking up of two trade references, or a cursory glance at accounts. She believes timber suppliers need to be shown the benefits of comprehensive credit-checking, and must understand the risks of cutting corners.

Superficial credit checks, or worse, no checking at all, can be fatal to a business. Of course, there are provisions in the Late Payment Act but what about bad debt?

Minimising risk

Timber suppliers should try to minimise this risk by doing the best possible research, said Ms Cooksley. This is why Status Credit has launched an added value, yet simple to use and effective credit checking service, designed for the timber trade. The online credit reports and offline investigation work are intended to help timber traders increase productivity and manage risk.

&#8220The industry is a volatile one. There is, and always has been, a higher risk element attached
to this sector”

Terri Cooksley, managing director, Status Credit Reports

Ms Cooksley said: “We know there have been many instances of fraud and rogue trading in the industry in recent times, so it made sense for us to bolster our efforts in credit investigation and data gathering processes.”

To reduce further the incidence of bad debts for its clients, Status Credit has started up the Timber Trade Intelligence Unit. This is a closed user group in which members report to Status Credit each month with all unsatisfied payments, legal actions commenced against a debtor, and other news items like “gone-aways”. The information is distributed amongst all the members, none knowing who has reported the event. Members also benefit from daily credit alert messages.

Ms Cooksley also believes that the need for constant credit checking and payment analysis and tracking is crucial. “The industry is a volatile one. There is, and always has been, a higher risk element attached to this sector.”

She warned that some credit agencies rely too heavily on balance sheet data gleaned from Companies House on which to produce credit ratings and reports. Companies House collects balance sheets and accounts but it does not verify or validate them.

“Status’s job, working alongside our parent Graydon UK, is to spot those bogus accounts, and warn our customers about them,” said Ms Cooksley.

After all, she added, checking the credit rating and payment history of companies is one sure way to ease cash flow worries.