Article
Written by Alice Payne
Posted on 02/03/2015

Build a robust customer on-boarding process for greater KYC practice

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Developing a successful business relies on building up a profitable customer base. You want to strike the right balance between offering good credit terms to attract new business and protecting your company against defaults. Which is why it’s so important to know who your customers are and whether they’re right for your business before you do business.

Customers can make or break a company. They can create an increase in sales and revenue or, if they behave fraudulently or fail to make due payments, the costs could be huge.

Which is why, nowadays, there’s a huge emphasis on knowing your customer (KYC). And it’s not enough just to research your customer before you on-board them – checks need to be ongoing throughout your relationship.

Banks and financial services institutions are obliged to comply with strict KYC regulation to make sure they don’t assist fraudulent or criminal activity. But really, it’s in every company’s interest to have a robust customer on-boarding process. So what are the key steps that help protect your business?

Know Your Customer

First, you need to know who your customer is and the company they work for (if applicable). You can then research whether they’ll likely be a reliable client. Make sure they provide you with a verifiable address and company name, and use a company checking platform, like the government website Companies House, to examine their credentials.

You can use this service to look into a company’s financial health, annual reports and statements. Always check the company’s registration number as this is the one UK data item that can never change. And make sure you also check the individual insolvency register, the disqualified directors search and the bankruptcy restrictions register.

The next stage is to delve deeper. For example, make sure the company’s auditors are registered with a recognised professional audit body, and check for valid VAT numbers.

And don’t forget to do an internet searches as part of your due diligence. This can give you important insight into the company and its activities.

Meet face-to-face

If a potential customer is looking for a trade credit agreement, don’t just rely on their references, ask to meet them face-to-face. If they are evasive about this, this could be a warning sign. When meeting, ask to do this at their premises, and be wary if a company has a PO Box number or their offices don’t show signs of long-term occupation. It’s also useful to get a landline number as this is more traceable than a mobile.

Ongoing checks

When on-boarding customers, classify them as low, moderate, or high-risk, and monitor the relationship regularly. The first six months can be a strong indicator, so be particularly diligent during this stage; for example, make sure you validate all delivery addresses. Even after this period, it should be part of your best practice to continue monitoring customers, regardless of your relationship.

Check the paper trail

A customer’s word is not their bond…so make sure you keep a paper trail. If you make a verbal agreement, put this in writing – at the minimum send an email with a read receipt. Setting out an agreement on paper will make it clear to both parties exactly what’s been established. And if there’s an issue later on, having something in writing will make all the difference.

And this extends to all areas of the paper trail. Ask for copies of any relevant accreditations, preferably sent directly by the accrediting organisation themselves, so there’s no room for forgery.

Find out more on KYC