How to Vet a Customer Before You Extend Credit
A new customer calls with a ₦1,200,000 order and asks for 30 days to pay. It feels like a win. It is also a loan. You buy the stock, you pay your staff, you deliver, and then you wait a month for money that may never arrive. Banks check people before lending them anything. Most small businesses check nothing, then spend the next quarter chasing.
Vetting a new customer takes about an hour. Chasing a bad one takes months and sometimes ends with you writing the invoice off entirely. That is the trade you are making when you skip it.
Size the risk, then check accordingly
Start by asking what this customer could actually cost you. A ₦250,000 first order at a 30% margin, gone bad, costs you the ₦175,000 you spent to deliver it. Painful, survivable. A ₦5,000,000 order you had to fund upfront can take a chunk out of your year.
Scale the checks to the exposure. Nobody needs a credit investigation to sell a small job. A large order on terms, from a company you had not heard of last week, deserves an hour of your attention.
Then confirm they exist as they claim. In Nigeria that means the CAC register: check the company is registered, that the name matches the one on their PO, and that the directors are the people you have been talking to. It is public and it takes minutes. Look also at how long they have been trading, whether the office and website predate last month, and whether the person placing the order has authority to commit the company. A "purchasing manager" ordering from a personal email address is not proof of anything, but it is a flag.
Ask for trade references, then actually call them
Ask any new customer who wants terms for two trade references: other suppliers who currently invoice them. A customer who pays their bills hands these over without hesitation. One who stalls, or gives you a friend, has already told you something.
When you call, do not ask "are they good customers?" Everybody says yes. Ask specifics. How long have you supplied them? What terms are they on? How many days do they usually take to pay? Have you had to chase, and did chasing work? The useful answer is rarely "they're fine". It is "they pay around day 45 and you have to call twice".
Start small, and take a deposit on the first job
The cheapest vetting tool you have is a small limit. Give a new account a starting credit limit you could survive losing, say ₦300,000, and let them earn more by paying on time. Say it plainly in the quote: new accounts start here, and the limit is reviewed after three invoices. Customers accept this far more often than owners expect, because most of them have the same policy.
On a first job, especially one where you fund materials, ask for a deposit. Thirty to fifty percent upfront is normal in printing, contracting, and distribution. It covers your outlay, and it tells you immediately whether this customer can and will move money when asked. Somebody who cannot pay a deposit on work they want is not going to pay an invoice for work they have already received.
Watch how they pay the first two invoices
The most reliable credit information you will ever get is how a customer handles your first two invoices, and it costs you nothing to collect.
Did the money arrive by the due date, or only after a call? Did the invoice sit unpaid for a week because nobody had given you a PO number? Did they pay most of it and quibble over the rest? Write it down. Two clean payments earns a higher limit. One that needed three reminders means the limit stays where it is, and the next job starts with a deposit again.
Slippage shows up in your aging report long before it shows up as a bad debt. A customer drifting from day 30 to day 45 to day 60 is telling you their own cash is tight, and the supplier who notices last is the one who gets stiffed.
Keep the history where you can see it
An hour of vetting is only worth it if you remember the result six months later, when the same customer calls with a bigger order and a tighter deadline. Arvalox keeps each customer's payment history next to their open invoices, so you can see how they have really paid you over time and who is slipping before you agree to the next job on terms. For the routines that keep any of this from turning into a crisis, how to get paid faster covers the habits worth building.