Fabian Demicoli


Probably not! Yet everyday, this is exactly what
happens with thousands of businesses in Malta. With the current economic
situation, trading at home and abroad is difficult enough, without the added
worry of not being paid. In certain industries, extended
credit terms are expected, leading to dire consequences when services and goods
are provided and the payment is late or more extreme, non-existent.

As Malta is a small country, there is
a general belief that most people know each other, or know someone who knows
them, especially in the business arena. Yet how many companies or traders would
openly admit to having cash flow problems or financial difficulties? This can
also relate to your existing customers with whom you have been trading with for
a number of years.

Every business needs a process or
system which minimises this risk. Whilst there are many different ways to
achieve this, some are more reliable and proven than others.

The best and easiest method is to
credit check. This simply involves obtaining a report on a company (a lot of
these reports are now available on line from companies such as Creditinfo Malta
Ltd and available to purchase via a tailored package to suit your company
needs, making them easily affordable). These reports contain financial
information, confirmation of their address, the directors/owners and if they
have any outstanding debts. This information can be critical when dealing with
new customers. You need to make sure that the company you hope to trade with
will be able to pay their bills. Even though such checks are no guarantee of
payment, the report will provide information whether there is a greater chance
of receiving payment, rather than just relying on a word of mouth reference.

If you are a small company and have a
chance to win a tender working with a large organisation, it is probably likely
you would work with them even if they have a bad credit report. Statistics show
that some of the worst payers are the larger companies who sometimes use their
position of strength to obtain more favourable credit terms.  If you credit check the organisation first,
you would enter the relationship with your eyes open. The knowledge you would
have from the report would provide you with the opportunity to put a provision
in place for potential late payment or highlight the need to negotiate a
certain percentage of the invoice in advance.

It is not just new customers that
need credit checking, it is good practice to regularly check your existing
customers to see their credit worthiness. 
As we are all too well aware, nothing is constant in business,
especially in the current economic climate where even long established,
reputable businesses have been failing. Establishing regular business checks is
an important and simple process for every business. This can be easily achieved
by a monitoring system helping your business to regularly monitor your
suppliers.  This can be carried out by
most credit checking companies, which enables you to continuously review your
suppliers credit report, so if there are any changes in their financial
wellbeing, you will be alerted.

Imagine if your main supplier goes
out of business, how quickly could you replace them? How would this effect your
organisation? What if they hadn't supplied you with the goods and services you
had pre-paid for – how would you recover the monies you'd paid to them and
where would you now source the products/services which you required?.

Even if the company which you are
trading isn't a bad debtor, a late or delayed payment could still cause you
severe cash flow issues. With limited finance available in the market at
present, do you really want to put your business under unnecessary strain for
the sake of a five minute credit check? Remember prevention is better than

In order to minimise your exposure to
bad debt, company failures and over-reserving, you must have knowledge of your
customers' and suppliers' financial strength. 
This can be seen by looking at their credit history and changing
financial patterns as shown on credit reports. If you are looking for new
customers and sales you need to make well informed decisions and not guess
credit limits.

One area a lot of firms forget to
review is their own credit worthiness. Do you know what information is
currently in the public domain in relation to your firm? Have your accounts
been filed correctly? Has there been an error or incorrect information been
placed against your firm?

You may not find this out until it is
too late and you and/or your company are refused credit by other companies who
have reviewed a credit report on your firm.

Every business needs to have a clear
and concise system to deal with credit risk. 
This process should review credit limits in line with your terms of
trade.  Company credit reports will help
you to establish these systems.

Remember a sale is not a sale until
the money is in the bank.

In most cases all you need to do is
save yourself one bad debt and the credit reports will pay for themselves.

Now ask yourself again would you give
a stranger €50?


Article by Mr. Simon Camilleri

Creditinfo Malta Ltd – Country


Simon Camilleri, Country Manager,
Creditinfo Malta has over a decade of experience in setting up and developing
innovative credit risk management companies throughout Europe, as well as
providing independent consultancy in this field and from his ten years in the
insurance industry

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The Malta Chamber of SMEs represents over 7,000 members from over 90 different sectors which in their majority are either small or medium sized companies, and such issues like the one we're experiencing right now, it's important to be united. Malta Chamber of SMEs offers a number of different services tailored to its members' individual requirements' and necessities. These range from general services offered to all members to more individual & bespoke services catered for specific requirements.

A membership with Malta Chamber of SMEs will guarantee that you are constantly updated and informed with different opportunities which will directly benefit your business and help you grow. It also entails you to a number of services which in their majority are free of charge and offered exclusively to its members (in their majority all free of charge).