Don’t just ask for a credit-reference—use it. Simply providing credit references does not make someone creditworthy. Checking credit references isn’t bad manners—it’s crucial for avoiding disaster. Make sure your credit application or other signed document gives you permission to contact references.
Three key questions to ask when contacting a credit reference are:
“How recent was your latest transaction with this firm?” If the most recent transaction was not within the last 4 months, the information may not be of great value because your customer’s financial position may have changed materially.
“Are the references related to the prospect in any way?” This may be difficult to assess, since people may lie. Use your instincts to decide how accurate the answer is and whether to probe further.
“Would you consider this firm a good, slow or bad payer?” Talking to a few references now can save you months of stonewalling down the road.
–Attorney Donald B. Kramer, J.D., President, Kramer & Frank, P.C. via AIPB Bookkeeping Tips