Credit checks and background checks by small businesses are components of overall business strategy that is often neglected by many SMEs. This is due to the fact that most DIY entrepreneurs don’t really grasp the importance of credit and background checks.
Background and credit checks have been around for some time now but seem to remain a privileged process that is reserved for the larger business corporations. It is shocking to know that the vast majority of small businesses out there are still ignorant of the importance of credit check, even when it doesn’t cost much to do a credit search.
A friend of mine that work for a major debt collection agency once said that millions of pounds are lost by small and medium sized businesses in the form of bad debt on a yearly basis due to the fact that they do little or no credit check or background check before hiring their staff members and doing businesses with other organizations.
The golden rule of any meaningful business strategy is that it must have full mechanism to protect the assets of the company. Having a process in place that ensures that all assets are safe is very important and that includes carrying out a proper credit check before engaging in any business venture or recruiting any staff.
Using any credit experts company of your choice, you can gain insight on both your local and foreign customers.
Importance of credit checks and background checks to small businesses
- Safeguards your investment: the essence of being in business will be lost if a company cannot safeguard its investment. Assets can easily be stolen by fraudulent employees if people with criminal mind are to be employed. Quality background check will ensure that this does not happen.
- Ensures that the cashflow never run out: without cashflows, a business will quickly go under, no matter how profitable the business is. By performing basic credit check on potential customers, companies will reasonably protect her capital by making sure that the enterprise is liquid.
- Builds reputation: the reputation of a company will be guided if it avoids dealing with criminals. Money launders for example might want to entice small businesses into doing business with them. Background checks when combined with credit checks will give red flags of potential dangerous dealings.
- Helps facilitate decision making: business and hiring decisions will be easier when managers are equipped with all the required information. Financial status of a potential trading partner and other information from AIS will greatly enhance the decision making ability of managers.
- Ensures compliance: the nature of many SMEs, a call centre for example requires that they are compliant especially when dealing with clients that have sensitive information like a bank or other financial institutions.
- It helps you know your customers: we all are aware of identity theft and how they can cause inconvenience both at the individual and corporate level. By performing credit checks, you will be certain that your potential customers and employees are in fact who they say they are.
Difference between a credit check and a background check
While both processes are used to understand a potential employment candidate or creditor, they are designed to achieve slightly different objective. In a nutshell, while a credit check strive to establish your financial track record, a background check tries to gather information about claims made by someone, for example, contacting an educational institution or a professional body to verify credential. Background checks is a little bit more complicated and could be costly when done outwith the confines of the law.
It is suicidal for a business of any size not to perform due diligence (which credit and background checks are bedrock). Dealing with the right people and enterprises will richly impact your organization. A major component of the psychology of a small business management is to have a fuller picture of everything from the beginning.