OWNERS of small firms across the South are leaving their businesses vulnerable to bad debts at a dangerous time by failing to vet clients face-to-face, warn experts.

Meeting the customer at their premises can reveal key business intelligence about their ability to pay up, says the Better Payment Practice Group.

BPPG officials are urging small business owners to doorstep debtors as a means of identifying the risk they face in offering or increasing credit.

Institute of Credit Management director general Peter Rowe said: "It would be seen as foolish to lend money to a stranger on the street - so why lend money to a business you know nothing about?"

Companies should conduct thorough checks:

Who are the potential debtor's major customers, suppliers and competitors?

How do they deal with late payment from their customers?

What is their market share?

What does their order book look like?

What profit do they retain in the business?

How do they plan to develop their business?

What keeps your debtors awake at night about their business?

Each year 10,000 businesses fail because their invoices are paid late and this figure is "likely to rocket" if the economy were to deteriorate, warns insolvency organisation R3.

R3's southern regional chairman Antony Fanshawe said: "Cashflow is a critical success factor for the small business, especially those with a turnover less than £3 million.

"Yet few avail themselves of the (late payment) legislation put in place to protect them, the Commercial Debts (Interest) Act 1998.

"I have often heard the comment - 'I didn't want to chase the debt because I didn't want to upset the customer'."

But firms should "accept that debt collection is a critical management function and invest time in it.

For further information on credit management see Better Payment Practice Group website, (www.payontime.co.uk).