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In my opinion the questions you ask are not favorite but required in order for you to make an educated decision on extending credit that will limit your risk while helping you make a sale. These are the questions I advise you ask for the vendor reference:
How long have they been a customer?
What are their terms? Do they pay within terms?
Do they take unauthorized deductions?
Why have they stopped doing business with you? (if they have)
Do they owe you any money now? How much? How much is current, over 30, over 60 etc?
How often do they order? What is the volume of the orders place with you? Dollar amount per month?
When calling a bank for a reference:
What type of account do they have (checking, savings, trust, business loan)
What is their average daily balance - monthly balance?
How long have they had an account with your bank?
Any NSF checks?
Any late loan payments?

Mark Gandy

Partner, B2B CFO

Posted on Aug. 24, 2011

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Michelle Dunn

Most of my B2B clients do, and the others have informal process-driven systems they follow to set up customers in their accounting systems and for collecting past-dues.

While that is well and good, it's the follow-up that is weak on setup. In responding to your question, I was reviewing one of the credit applications of one of my clients.

In all cases, we have blanks to fill in for vendor and bank references. But I'm not convinced we're asking the best questions to these references.

In all cases, we are solid on the collections process ... 1) we review agings weekly, 2) make calls to past-dues weekly, 3) and continually work on finding ways to get paid quicker.

If you do not mind, what is your favorite question to ask vendors and bankers before approving credit for a new customer?