Checking a new business customer
Check that a new business customer is real and likely to pay before you give them credit.
5 min read
A new business customer with a big order is exciting. It is also the moment you are most likely to lose money: you will buy materials, do the work and deliver, often before you are paid. If the customer turns out to be slow, disorganised or simply not who they said, it is your money that is stuck. A little checking before you give credit avoids most of it.
Is the business real?
Start with the basics. A genuine business can answer these easily, and will not be offended that you asked:
- Full legal name and address — not just a trade name and a mobile number.
- GSTIN — you can look it up on the GST portal's public search to confirm the name, address and whether the registration is active.
- Company or LLP details — if they say they are a company or LLP, its registration can be checked on the Ministry of Corporate Affairs website.
- A real place of business — visit if you can, or at least look it up on a map.
- A person who is authorised to place the order, with an official email address.
Be careful of a new "customer" who places a large first order, wants it urgently, and asks for credit or delivery to an address different from their registered one. It is a pattern used to take goods and disappear. Ask for an advance, or deliver only to the registered address.
Will they pay?
A real business can still be a bad payer. Ways to find out before you find out the hard way:
- Ask other suppliers. People in the same trade usually know who pays on time and who does not.
- Ask the customer for references — two current suppliers you can call.
- Look at how they behave before the order. A buyer who is vague about payment terms, avoids committing in writing or keeps changing contacts is showing you something.
- Check whether their GST returns are being filed, where the portal shows it. A business that does not file regularly may not be well run.
Start small, then extend credit
The safest way to learn how a customer pays is to see it:
| Stage | Terms |
|---|---|
| First order | Advance, or payment on delivery |
| After a few on-time payments | Short credit, on a limited amount |
| Once they have a record | Longer credit, with a ceiling you set |
Set a credit limit for each customer: the most they can owe you at any time. When they reach it, the next delivery waits until they pay. Decide it in advance, so it is a rule rather than an awkward conversation — see getting paid on time.
An advance on a first order is normal in business, not an insult. Put it in your quotation as standard: "50% with order, balance on delivery for new accounts." Serious buyers accept it; the ones who argue hardest are often the ones you most need it from.
Get the deal in writing
Before you start: a quotation, their purchase order matching it, and agreed payment terms — see purchase orders. If something goes wrong later, these papers are what you rely on.
Keep watching
Checking is not a one-time job. A customer who paid well for a year can start paying slowly — often an early sign that their business is in trouble. If payments start slipping, slow your deliveries and reduce their credit limit before the amount they owe grows.
Describe a new customer and their order to the tool below, and it will help you decide what to check and what terms to offer.