How to check a business before you give it credit.
The cheapest bad debt is the one you never take on. A few checks before you open an account tell you who you’re really dealing with, and whether they’re likely to pay.
By Kyle Zorger, founder of ARS Financial · Updated · 5 min read
In short
- Confirm the business exists and is active with a CIPC search, and check who its directors are.
- Check that its VAT number is real if it says it’s VAT-registered.
- Get a commercial credit report from a credit bureau, with the customer’s consent.
- Call at least two trade references and ask how the customer pays.
- Start with a small credit limit and increase it as they prove they pay on time.
The checks, step by step
- 01
Get the full legal details
The registered name and registration number, not just the trading name. A credit application form captures all of this in one go.
- 02
Search CIPC
Search the registration number on the CIPC website to confirm the company exists, check its status (in business, or being deregistered) and see who its directors are.
- 03
Verify the VAT number
If the customer says it’s VAT-registered, check the number with SARS’s VAT vendor search on eFiling.
- 04
Run a credit report
A commercial credit report from a bureau such as TransUnion, Experian or XDS shows payment behaviour and adverse listings. Get the customer’s consent first.
- 05
Call trade references
Ask at least two current suppliers how long they’ve supplied the customer, on what terms, and whether they pay on time.
- 06
Ask for a bank code
With the customer’s consent, their bank can give a rating of their ability to meet a commitment of a given amount, from A (very good) down to E.
- 07
Look them up
Check their website, Google reviews and news mentions, and whether the address and landline are real.
Red flags
- A large first order from a business you’ve never heard of, with pressure to deliver urgently.
- A recently registered company asking for generous credit straight away.
- Reluctance to give a registration number, trade references or a signed suretyship.
- A trading name that doesn’t match the registered company, or details that change between documents.
- Directors linked to several businesses that closed or were deregistered.
- Only a cellphone number and no verifiable physical address.
One red flag isn’t proof of anything, but two or three together are a reason to ask for payment upfront.
Set limits and keep watching
- Start with a modest credit limit, and raise it only after several on-time payments.
- Re-check customers whose payments start slowing down, or who suddenly order much more than usual.
- Stop supplying on credit as soon as an account goes overdue, and follow a fixed reminder schedule.
Privacy and consent
Credit checks involve personal information about the directors, so get written consent, ideally in your credit application, and handle the information in line with POPIA. Use it only to assess credit, and keep it secure.
ARS Financial can check a customer for you before you give credit, from R199 per check, using the customer’s signed consent. And if a customer still stops paying, we can recover it.
Frequently asked questions
Search its registration number on the CIPC website. It will show whether the company exists, its status, and its directors.
Yes. Commercial credit bureaus such as TransUnion, Experian and XDS provide business credit reports. Get the customer’s consent first, ideally in your credit application form.
A rating, from A down to E, that a bank gives on whether its client can meet a commitment of a stated amount. You need the customer’s consent, and you request it through your own bank or a credit bureau.
Carefully. Start with payment upfront or a small limit, get a signed suretyship from the directors, and increase the limit as they prove they pay on time.
Hand us the invoice. We’ll take it from here.
No recovery, no fee, and a live view of every step in your client portal. Based in Cape Town, working nationwide.