The easiest debt to recover is the one that never goes bad. A structured customer vetting process — applied consistently before extending credit — is the highest-return activity in any receivables strategy. It takes less time than chasing a bad account and costs a fraction of writing one off.
Confirm the legal entity
Start with the basics: who are you actually dealing with? Many businesses trade under names that are different from their registered legal entity. Get the ACN (Australian Company Number) or ABN and verify it on the Australian Business Register (abr.business.gov.au) or ASIC Connect (connectonline.asic.gov.au). Confirm that the entity is active, check the registered address, and — for companies — identify the current directors. Extending credit to "Acme Supplies" when the legal entity is a shelf company with two-dollar share capital is a different risk than extending it to a trading company with years of history.
Search the PPSR
The Personal Property Securities Register (PPSR) shows whether the customer's assets are already encumbered by a registered security interest. A company with all its assets pledged to a financier has less available to creditors in the event of insolvency. A quick PPSR search (ppsr.gov.au) costs $2.20 per serial-numbered item or $3.40 per grantor search and takes two minutes.
Ask for trade references — and call them
A trade reference is only useful if you actually contact the referee. Ask for two or three current suppliers, call each one, and ask specifically: how long have they traded with this customer, what is the credit limit, and have they had any payment issues? A referee who hesitates, qualifies their answer, or reports slow payment is telling you something important.
Run a credit check
Commercial credit reports from providers such as Equifax, Illion or Creditor Watch show payment defaults, court judgments, and in some cases cash-flow risk scores. For accounts above a material threshold — set this at whatever amount would hurt if it were written off — a credit report is a reasonable investment.
Have a signed credit application
All of the above is most useful when it feeds into a signed credit application that captures the customer's legal details, directors, credit limit, agreed terms, and personal guarantees where appropriate. The credit application is the document your recovery rests on if things go wrong.
Apply your rules consistently
Set a credit limit and apply it. It is common to extend more credit to a customer who asks, without revisiting the underlying creditworthiness. The customer who owes you $50,000 but was approved for $10,000 is a risk management failure, not just a commercial one.
If you are reviewing your credit application process, talk to Merion — stronger credit decisions upstream mean fewer recovery problems downstream.