As the owner of a business, when dealing with a new customer, your first line of defence is a background check, as it can help you determine if you should do business with them as long as you know how to read one and identify red flags.   

At Summit A*R we’re the consumer and commercial collection agency that businesses across the United States trust to recover their revenue. This is because of our 28 years of experience, great customer service, and result-oriented strategies. We believe that with the right screening process, many businesses can lower their percentage of bad debt.

When checking new customers, here are some red flags you should watch out for:

#1 Low Credit Score

While credit scores are simplistic and don’t always offer the complete story, they’re often a good indicator of a potential client’s creditworthiness. Most credit scores are anywhere from 300 to 850. You should be cautious if a potential new client has a credit score of less than 600. A consumer or business with a credit score upwards of 700 is usually more trustworthy.

Often, new businesses have low scores because they’re still building their credit. Here, you can ask if the business owner would like to leverage their personal credit score instead. Sometimes, businesses are simply rebuilding their credit after some bad luck. That’s why a credit score should be taken as an indication at best.

#2 Bad Credit Report

If a business’s credit report has issues such as large revolving credit, multiple recent loan applications, loans in collections, defaulted payments and other delinquencies, repossessed collateral, Chapter 7 or Chapter 13 bankruptcies, then take these as red flags.

#3 Inconsistencies

It’s a good idea to cross-check information your new potential customer gives you. Watch out if information such as their name, address, website, phone number and more doesn’t add up or match with other information. While some inconsistencies are normal, too many should be taken as a red flag.

#4 Alarming Public Records

Another way to conduct a background check on a business is to check government sources like the Federal Trade Commission (FTC) for bad practices. You may also need to check with organizations like the Security and Exchange Commission, the American Bar Association, and other agencies depending on the nature of your industry. Likewise, check county court records and property court records to see if they have been involved in any legal cases.

#5 Bad Report from the BBB

At Summit A*R, we have a strict no-complaint policy. Our excellent level of customer service is evidenced by our A+ score from the Better Business Bureau (BBB). This score is only given to top businesses that minimize customer complaints and act quickly to resolve any issues. Through the BBB you can check a business’s track record to see if they’re someone you’d like to be involved with. The BBB and other business affiliations can give you a sense of what kind of commercial client you’re working with. For example, you can see some of our affiliations include the BBB and the American Association of Healthcare Administrative Management.

#6 Social Media Issues

Nowadays, many businesses have a presence on the internet. Check their website and social media accounts such as Twitter, Facebook, LinkedIn to see if there’s something suspicious. If their presence lacks authenticity, then it could speak to their character. For example, some businesses hire companies and influencers to leave them positive reviews to create an illusion of honesty and success.

#7 Fake References

Some people are in the business of creating fake references for consumers and commercial entities to improve their standing. While the problem isn’t widespread, it’s certainly something to watch out for. Usually, when you dig deep enough, you can spot a fake reference. Call the place of reference at different times of the day and pay attention to discrepancies. If the company offering the reference claims to be in Texas but they have a phone number based in Timbuktu, then there’s more to it than meets the eye.

#8 Bad Gut Feeling

Sometimes, you must go with your gut feeling. It’s how many businesses survived before the internet gave them the luxury of conducting background checks. If everything seems to check out but you can’t shake a nagging feeling, then perhaps you should pay heed instead of ignoring it.  

When You Can’t Run a Background Check

Not all businesses have the luxury of running background checks on their clients or partners. Veterinary clinics are a great example of a business where clients can wind up owing large sums, but there’s no way for clinics to learn about delinquent customers ahead of time.

There are a few things businesses like these can do if they want to avoid sending their debts to veterinary collections.

It’s important to send invoices and payment reminders on time. You should also incentivize timely payments by offering early payment bonuses and penalizing late payments with fees. Of course, all of this should be mentioned in the contract.

Likewise, try to avoid invoicing mistakes or your customer may start paying you consistently late. For example, if you make rudimentary billing errors, then not only will your customer challenge the invoice, but they’ll challenge other invoices in the future. This will cost you time and hurt your cash flow.

It’s also important to act fast when dealing with debt. Statistically, debt grows harder to recover with time. Turn to a highly effective agency like Summit A*R when trying to collect payments from bad customers. We boast twice the national average recovery rate because we have a team of experienced and licensed professionals who have the skill set required to convince delinquent customers to clear their dues.

Usually, our campaign of demand letters and phone calls are enough to clear accounts. Most consumers and businesses alike stop making excuses when a reputable debt collection agency is involved. This is partly because unlike your in-house collection department, we can report delinquent customers to the major credit bureaus. For consumers, this can affect their ability to rent a home, buy a cellphone, or apply for a credit card. For businesses, this makes it much harder to conduct financial transactions. Ultimately, we find that bringing humanity to debt collection makes the process faster and more effective, in particular when dealing with medical and veterinary debts.

For particularly stubborn accounts, we can also pursue legal action with the assistance of a licensed attorney after performing a cost-benefit analysis. If legal action is feasible, then we approach you for written permission before taking this step.

It can be frustrating for a business to run into delinquent accounts. You deserve to be paid for your services. Let us help you get what is rightfully yours.