Get information about your clients
First step prior to commercial negotiation, getting information about your clients is an need to:
- know who is your client: what is the history of the company, does he respect its commitments, is it solvent ?
- well orientate commercial negotiation. Knowing your client under different points of view (size, profitability, solvency, position on the market etc.) will be useful as much in your commercial approach as in the prevention of a potential payment default.
- Offer solutions to insolvent clients to collaborate without risk of unpaid invoices: credit insurance, down payments, delegations of payment, bank guarantees…many solutions exist to secure an order coming from a risky client.
Focus your commercial efforts with healthy companies which have a good development potential. Such partnership will contribute to the success of your business while a client in financial difficulties risks to lead your business to take high financial risks. The first cause of businesses default is ... overdue invoices from clients!
The analysis of solvency of a business is mainly based on these 2 kind of information (financial / legal and behaviour), each balancing the other one. For example, a business led by people of confidence will nevertheless be risked if its financial standing is bad. On the contrary, a business which has a good financial structure will be risked if its leaders use fallacious reasons to not pay their suppliers.
The economic context of the buyer's sector of activityThe situation of the sector of activity (eg building, steel, distribution, car ... etc) of the analyzed company is also taken into account. It is a macro-economic information that indicates what is the market trend of the buyer. It therefore has an impact on the assessment of its solvency. However, the situation the sector of activity should not prevail on the intrinsic situation of the buyer in his creditworthiness assessment. Some companies can be successful in sectors in crisis, and vice versa.
How to get these informations ?Getting informations is very different according to the country of the buyer. In France for example, every company has to publish every year its financial statements. Therefore, it is quite easy to find this information (see below). In Saudi Arabia, it is very difficult to get these data as financial statements are used only as an internal tool of management.
However, the best way to get informations is to request it from your client himself! Meet him with this aim in view has numerous advantages:
- you are guaranteed to get fresh information. The situation of businesses changes very quickly!
- it is free and it is only consumer of a little of time!
- the exchange of information allows to establish a relation of confidence as well as the bases of a solid partnership. If your client refuses to transmit to you this information, try first to understand the reason of this refusal, then be careful before working with him and ensure that you can get guarantees of payment.
|Legal and financial informations||Respect of commitments|
|Financial information agencies: D&B, Coface provide you with full financial reports. Quality and cost depend on each agency.||Credit insurances : AIG, Euler Hermes, Coface offer to their clients good quality information : financial statements / legal events and payment behavior coming from their own experience with french companies.|
|Other suppliers of your client. Request references to your client in order to get from his own suppliers his payment behavior.||Bank of your client: it is completely possible to get information from the banks which works with your client. They are in the first "lodges" to see the treasury of firms. Be carefull because in some cases, the banker can hide some negative information because his interest is that you grant credit to his client in trouble to diminish its own risk.|
|Your client himself: he will give you his last balance sheet and very recent information on the evolution of his financial standing. His explanation will allow you to understand more easily some features retranscribed in his financial statements.||Payment history you have with your client. Are you getting payment on time or with delay ?|
|Your sales representative: they are in the best position to get informations from the client and from the market. However, be careful and check the informations received from them.|
Form template including all needed information to collect before opening a customer account.
Template letter to be sent to another supplier of your client requesting what is his payment behavior with him.
Form template in french including all needed information to collect before opening a customer account.
Template letter for a request of legal and financial information to a potential new customer.
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