The Ultimate Guide to Preventing Bad Debt: Strategy 2: Five-Step Financial Health Check Before Granting Credit

​In our last article, Part 1 of the Bad Debt Prevention series, we explored the key warning signs of slow-paying customers. In this article, we will reveal the second strategy: a five-step financial health check for your customers, including free and paid tools to help you reduce risks from the start.

Avoid bad debts at the source with these essential due diligence steps for new customers:

1. Search Company Registry Online: Check director changes and any registered charges or liens.  

2.  Use the Official Receiver’s Bankruptcy Search: Confirm if liquidation petitions exist.  

3. Review MPF Contribution Records: With consent, monitor for consistent contribution defaults.  

4. Subscribe to Credit Reporting Services: Use information providers like RMS or Dun & Bradstreet for deep insights.  
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5. Google Search: Try combinations like “Company name + late payment” or “Company name + unpaid wages” for hidden red flags.

👉 Expert tip:
​Build a New Customer Approval Checklist integrating the above 5 steps to reduce your risk from the outset.

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​Introduction for Part 3 - Accounts Receivable Warning System - Thank you for following Part 2 of our series on preventing bad debt, where you learned how to conduct effective financial due diligence on new customers. The final part will focus on how to establish an effective accounts receivable warning system so you can spot overdue payments early and take prompt action to reduce bad debt losses by up to 70%. Stay tuned to complete your comprehensive bad debt prevention strategy!