Extending credit to new clients is a common business practice, especially in B2B transactions—but it carries risk. A key tool in your credit control process is the trade reference: a practical, often underused method of assessing a potential client’s payment reliability.
This article explains how UK businesses can use trade references to vet new clients, avoid bad debt, and make informed decisions before entering into financial agreements.
📌 For more on evaluating financial risk, see: Assessing Client Reliability: Credit Checks and Beyond
What Are Trade References?
A trade reference is a testimonial from a supplier or vendor that speaks to a company’s payment history and creditworthiness. It usually includes:
How long the client has been a customer
Typical payment behaviour
Credit limits or terms extended
Whether payments were made on time
They serve as a real-world snapshot of how a company handles its financial obligations.
Why Trade References Matter in Client Vetting
Trade references provide qualitative insight that complements formal credit reports. While credit agencies like Experianor Creditsafe offer detailed data, trade references give a more personal view into behaviour that algorithms may overlook.
Benefits include:
✅ Gaining confidence in extending credit
✅ Reducing risk of late or non-payment
✅ Understanding a client’s payment ethics
🔗 Related: Effective Strategies for Ensuring Clients Pay On Time
How to Request Trade References
Step 1: Include It in Your Client Onboarding Process
When setting up a new account or contract, ask for two to three trade references from recent or current suppliers. Include this in your credit application form or new client documentation.
Example wording:
"Please provide contact details for two existing suppliers who can verify your business’s payment history."
Step 2: Reach Out to References Professionally
Email or call each reference and request the following information:
How long they’ve worked with the client
What payment terms were agreed
Whether invoices were paid on time
Any concerns or delays in payment
Keep your tone professional and neutral—you're gathering facts, not making accusations.
What to Look for in a Trade Reference
When reviewing responses, assess the following:
🔹 Consistency of payments – Do they pay on or before the due date?
🔹 Disputed invoices – Are there frequent issues that delay payment?
🔹 Credit limits – How much risk are other suppliers willing to accept?
🔹 Length of relationship – Long-standing relationships often indicate reliability.
If more than one reference raises concerns, it’s a red flag. You might choose to offer reduced credit, require upfront payment, or decline the client altogether.
Verifying Trade References for Accuracy
Unfortunately, not all trade references are truthful. Here's how to verify:
✅ Check whether the company exists on Companies House
✅ Search the referee's business on Will They Pay to validate payment credibility
✅ Cross-reference with credit reports for consistency
💬 Want to know more about securing client payments? Read: Designing a Clear Payment Policy for Your Business
Combining Trade References with Credit Checks
Trade references should be used alongside formal credit checks for a comprehensive view of your client’s financial health. Credit checking platforms can provide:
Company credit scores
CCJs or legal filings
Director history
Industry trends and risk ratings
Together, they create a balanced profile that helps you make smarter, lower-risk decisions.
Conclusion: Build Safer Business Relationships with Trade References
Trade references offer a simple, affordable, and effective way to vet new clients before offering credit. Combined with credit checks, they give you a reliable picture of how a potential client treats its suppliers.
✅ Integrate them into your credit control policy
✅ Standardise how you request and review them
✅ Use them to make smarter, more confident business decisions
For UK SMEs looking to avoid bad debt and improve payment reliability, trade references are an essential tool in the risk management toolbox.
Additional Resources
Will They Pay – B2B Payment Review Platform
Experian UK Business Credit Reports
Companies House – Verify UK Businesses
