Recently we’ve had a spate of ratings on The Prompt Payment Directory with explanations to the effect that the customer couldn’t afford to pay the invoice.
There could be various reasons why a customer might not have been able to afford the invoice but armed with this insight from The Prompt Payment Directory all potential suppliers should of course be very wary about doing business with a company in this position. However, that doesn’t mean a business relationship should be ruled out altogether.
For any supplier armed with this information about a company they are proposing to do business with we’d recommend asking for at least 50% of the payment in advance and if possible all of it. In some verticals it’s not unusual when doing business with a customer for the first time to make such a request.
Also, go through the usual channels to check the company credit rating, and if need be ask the potential customer directly whether they know of any foreseeable impediments that may prevent them from paying their invoices…. see what they come back with, if it’s nothing then they may be hiding something.
It would also be worth taking a look at the most recent set of accounts, a basic version of which will be available on the Companies House register.
The outcome of of these discussions and investigations should help shape the final contract.
The Prompt Payment Directory’s scoring system aggregates data across various criteria including business relationship and the desire to continue working with a customer. Just because customer’s pay late it doesn’t always mean they have been difficult or unpleasant to work with.
If an invoice can’t be paid it could be due to an unusual occurrence that caused a temporary cashflow problem beyond the customer’s control.
If you see a PPD star rating of between, say, two and four for a company on our directory, it’s worth checking the detail of the rating on the company details page.