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Don’t just ask for a credit-reference – use it!

Sound silly? Companies too often think that a prospect is creditworthy simply because it  provided references. Or, they feel that “checking up” isn’t nice. Or they are uncomfortable asking strangers detailed questions about someone else’s business. Make sure your credit application or other signed document gives you permission to contact references.

Although a credit check is a large and complicated subject, here are three basic questions:

“How recent was your latest transaction with this firm?”
If the latest transaction was not within the last 4 months, the information may not be of great value because your customer’s financial position may have changed materially.

“Are the references related to the prospect in any way?”
This may be difficult to assess, since people may lie. Use your instincts to decide how accurate the answer is and whether to probe further.

“Would you consider this firm a good, slow or bad payer?”
Talking to a few references now can save you months of stonewalling down the road.

Source: American Institute of Professional Bookkeepers