Credit Check Trends in Australia

Credit Check Trends in Australia

There’s a Swahili proverb that reads “Kukopa harusi, kulipa matanga.” It translates “borrowing (money) is as joyful as a wedding, paying it back is as mournful as a funeral.” In the same way, many customers are happy when they’re receiving your goods, services, or credit terms. Your relationship with them becomes far icier when it’s time to pay up.

Debt collectors are often addressed with hostility. This is a natural human instinct since a visit from the debt collector means you’ve already fallen behind on your payments. Any reminder that you have failed your obligations will induce guilt, shame, and possibly panic, and a lot of people cover this up with aggression.

Unfortunately, the person on the receiving end of this aggression – at least initially – is a junior accountant who would rather be anywhere but where he or she is. At a later stage, you can bring in a professional debt collector who may have the style, personality, and experience suited to handle debtors. In the meantime, make life easier for your young team.

 

Look into your client’s background

While we all find ourselves in cash crunches that make us late with the bills, there are certain people for whom late payments are a way of life. It might be that their dealings are governed by irregular cash flow, or maybe they’re bad with money. For others, it’s a matter of living in the moment. They enjoy things ‘now’ without thinking about how they’ll pay.

There’s another more devious category of customers. This type of person deliberately aims to gain goods and services without paying for them. And then there’s the kind who are already so deep in debt that they couldn’t pay you if you if they wanted to. However, they still need your products or services, so if they have a chance to access them, they won’t try to resist.

It’s hard to tell someone’s credit worth just by looking at them. Our modern society has become proficient at “faking it ‘till we make it” so checking out your prospect’s clothes, car, or stated address has no bearing on their ability to pay you.

 

The bank knows best

Similarly, some of the most successful people in the world pride themselves on their “ordinary” appearance and $1 salaries. They prefer to blend in – or try to – so their physical presence is in no way a sign of their net worth. The only way to know for sure that a client is good for their promissory note is to run a credit check.

People may have different reasons for being uneasy with credit checks. In some regions, every credit check docks a few points off the person’s score. It is assumed that if someone is checking your credit, there must be a problem, and so you unfairly get labelled as risky.

For others, it’s a matter of privacy. It’s a social taboo to talk about how much money we make, so having someone dig into your financials seems inappropriate. For some people, having someone question your cash status is downright offensive. However, as a business entity, it’s essential to know who you’re dealing with regarding dollars and cents.

 

It’s nothing personal

It’s hard to convince someone that you’re not questioning their character when you request a credit check. This can be even more awkward when the confirmation request comes from a sales clerk or front desk personnel. It may not necessarily cost you business, but it frequently leads to the kind of “call your manager” scene that will lead to high turnover of junior staff.

To empower your service staff, save time, and avoid awkward situations, incorporate credit checks into your written policy. This way, any client approaching you is aware that their financial status will be inspected. Junior staff facing harassment can calmly take out the relevant documents to take the heat off themselves and make their work day a little easier.

If you have a showroom or front office, you might even have a pretty plaque that reads “we offer an easy instalment plan subject to credit checks.” If your business is service based, it’s standard practice to include payment terms and non-disclosure. Add a credit check clause, so they’re aware of it from the outset. It will save you unnecessary debt collection stress.

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