Why do wholesalers need to credit check customers?

Wholesalers operate on low margins (typically 5% to 15%). A single bad debt of £10K requires £67K to £200K in additional sales to recover the lost profit. Trade credit (30 to 60-day terms) means you deliver goods today and hope to be paid in 2 months. If the customer fails in that window, you lose both the goods and the profit.

When should I run a credit check on a trade customer?

Run a check: before opening a new trade account, before increasing a credit limit, when a customer requests extended terms (60 to 90 days), when payment becomes slower than usual, annually for all customers with limits above £5,000, and immediately if you hear rumours about the customer in the market.

What credit limit should I set for a new customer?

A common formula: set the credit limit at no more than 10% to 15% of the customer net assets as shown in their last filed accounts. For a customer with £100K net assets, a £10K to £15K limit is appropriate. Never set a limit higher than you can afford to lose. For customers with no filed accounts (micro-entities), start at £1K to £2K and increase only after payment history is established.

What are the warning signs of a wholesale customer about to fail?

Key warning signs: payment slowing from 30 days to 45 to 60 days, ordering patterns changing (larger orders suggest stock-building before closure, or smaller orders suggest cash pressure), accounts overdue at Companies House, new CCJs registered, directors resigning, and requests for extended terms or payment holidays.

Should I use retention of title for wholesale goods?

Yes. A retention of title (ROT) clause in your terms means goods remain your property until paid for. If the customer enters insolvency, you can recover unsold goods. However, ROT must be properly documented in your terms, accepted by the customer before the first delivery, and goods must be identifiable (not mixed or processed). Check your terms with a solicitor.

How do I recover goods if a wholesale customer goes into insolvency?

Contact the insolvency practitioner immediately with: your retention of title clause, proof the customer accepted your terms, delivery notes showing which goods are yours, and a request to attend the premises to identify and collect your goods. Act fast. Once goods are sold by the IP, recovery becomes a claim for proceeds (much harder).

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Trade Credit

Wholesaler Credit Check: Protect Your Margins

You sell on 30 to 60-day terms. Your margins are 5% to 15%. One bad debt of £10K needs up to £200K in new sales to recover. Check every trade customer before you extend credit.

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Check a trade customer

Enter a company name or number. See financial health, CCJs, director history, and insolvency risk instantly. Know before you ship.

The wholesaler bad-debt problem

Wholesale margins cannot absorb bad debts. If your gross margin is 10%, a £10K bad debt requires £100K in additional sales just to break even. For a £50K bad debt, you need £500K in new revenue. Prevention (a £29 credit check) is cheaper than any cure.

The maths of a bad debt at different margins:

At 5% margin: £10K bad debt = £200K in sales needed to recover

At 10% margin: £10K bad debt = £100K in sales needed to recover

At 15% margin: £10K bad debt = £67K in sales needed to recover

A single unchecked customer can wipe out months of work across your entire sales team.

When to check

New account opening. Before you deliver a single case. No exceptions. The £29 check costs less than one pallet of goods.

Credit limit increase. Customer wants to go from £5K to £20K. Check their position has improved, not deteriorated, since you first opened the account.

Payment slowing. Customer paying at 45 days when terms are 30. This is the single most common warning sign. Check immediately before the next delivery.

Market rumours. You hear from other suppliers that this customer is paying late or has had a CCJ. Verify immediately. Do not wait for your own payment to be missed.

Warning signs in wholesale customers

Payment days stretching

30 days becomes 40, then 50, then 60. They are using your goods as working capital. By the time they hit 90, it is often too late to recover.

Unusually large order

Customer doubles their normal order. Could be growth. Could also be stock-building before closing (selling your goods for cash to pay other creditors). Check before shipping.

Accounts overdue at Companies House

They have not filed their accounts. If their results were good, they would file. Late filing in wholesale customers correlates strongly with imminent failure.

Director changes

The founder resigns and is replaced by someone you have never met. Or a new director is appointed with a history of prior insolvencies. Either pattern warrants immediate investigation.

A British street lined with stone buildings — George Ciobra / Unsplash

Who needs wholesaler credit checks

Food and drink wholesaler

Perishable goods, 7-day delivery cycles, 30-day terms. A customer failing with 4 weeks of deliveries outstanding is a total write-off (goods consumed, no recovery possible).

Building materials supplier

High-value deliveries (£5K to £20K per load) to construction companies that operate on thin margins themselves. One contractor failure can create a £50K+ hole in your receivables.

Electrical and plumbing distributor

Trade counter sales on account to hundreds of small contractors. Individually small balances (£500 to £3K) that add up. Hard to monitor every account manually.

Clothing and fashion wholesaler

Seasonal orders placed months in advance. If a retailer fails before the season, you have stock made to their specification with no buyer. Check before committing to production.

A £29 check protects thousands in margin.

Quick Check (£29) analyses the customer across 72 risk signals from 12 UK data sources: financial health, payment court judgments, director track record, insolvency history, and filing status. Know before you ship.

Check a customer Monitor your ledger (£19.99/mo)

Monitor your trade debtors

A credit check at account opening tells you the position that day. Customers deteriorate. RecoupIQ monitoring (from £19.99/mo) tracks your entire customer ledger and alerts you within 24 hours of any distress signal: late filing, new CCJ, gazette notice, or director resignation. Available via the web dashboard or the Microsoft 365 Trust Check app (per-seat for teams). RecoupIQ is a Microsoft partner.

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Related guides

Last reviewed: July 2026. General information for UK businesses. Not financial advice. RecoupIQ Ltd, Company No. 16947526, ICO ZC077511. Microsoft Partner.