A business credit check is a search of a company's payment history, public filings and adverse listings, run before you hand that company an invoice they pay later. It tells you whether the business has defaulted before, whether there are court judgments against it, whether ASIC lists it as under external administration, whether the ATO has disclosed a tax debt, and how it's been paying other suppliers.

Reading the report is the easy part. Deciding the credit limit, deposit, guarantee or security you attach to the account is the part that actually protects the invoice.

This is general information and not legal advice. If you're drafting terms or chasing a specific debt, get advice on your situation.

A commercial credit report pulls identity, structure and payment behaviour into one file. What you'll usually see:

• Company identifiers: ABN, ACN, trading names, registration date and current status.

• Directors and shareholders: named officeholders and any recent changes.

• Adverse listings: defaults, court judgments and mercantile enquiries logged by other credit providers.

• Payment behaviour: how the business has paid trade suppliers, often as a days-beyond-terms figure.

• ATO tax debt disclosures: where the ATO has reported the debt to a bureau.

• External administration flags: liquidation, voluntary administration, deregistration warnings.

Commercial credit information does not automatically follow the OAIC retention periods that apply to consumer credit reports. How long an adverse item remains visible can depend on the type of information, its original source and the bureau’s own retention practices. Check the notes in the report or confirm the period directly with the bureau.

The three main commercial bureaus in Australia are CreditorWatch, Experian Australia and Equifax. They draw on overlapping but not identical data sets, so a report from one won't always match a report from another. If you already understand how a default gets listed, you know what the adverse section of a report is showing you from the other side.

Run the free searches first. They'll often tell you enough to price the risk on a smaller account without paying for a full bureau report.

• ASIC company search. Free basic information includes ABN, ACN, ARBN or ARSN, registration date, next review date, registered-office suburb, state and postcode, and lodged documents. Paid extracts sit alongside: a current company extract is $10, current and historical is $20, roles and relationships is $23, and a certificate of registration is $23. Officeholder residential addresses aren't in the extract.

• ABN Lookup. Confirms the trading entity, GST registration status and any historical name changes. If the name on the quote doesn't match the ABN, ask why before you invoice.

• PPSR search. Shows whether security interests have been registered against the customer’s assets and which collateral they cover. It does not tell you how much remains owing or whether the assets are fully encumbered, so broad registrations should prompt further questions rather than an automatic conclusion.

• Google and news search. Winding-up notices, ASIC insolvency notices, court listings and industry chatter often surface here first.

Two minutes on ASIC and ABN Lookup can flag the deregistered entity, the recently changed director, or the trading name that doesn't match the ABN on the quote.

A single adverse entry may have a reasonable explanation. Several entries over a short period deserve more weight.

Default listings (a formal record that an account was overdue and unpaid). Commercial default-listing requirements are not the same as the OAIC rules for consumer credit defaults. Before listing an unpaid business account, check the bureau’s requirements, the terms accepted by the customer and whether the debt is genuinely disputed. A default from three years ago may be less concerning than three defaults recorded over the past two years.

Court judgments and repeated mercantile enquiries. A judgment means a court has entered judgment against the business. Check the case details to understand who brought the claim and what it involved. Multiple mercantile enquiries can indicate that collection agents have assessed or shown an interest in debts involving the business.

Recent director changes, deregistration warnings, external administration. A director resignation weeks before you extend terms is worth a phone call. External administration is a stop sign.

ATO tax debt disclosure. The ATO can disclose a business tax debt to a credit bureau where the business has an ABN, is not excluded, has one or more tax debts of at least $100,000 overdue by more than 90 days, isn't engaging with the ATO, and has no active IGTO complaint about the disclosure. If it appears on a report, treat it as a late-stage signal, not an early warning.

Use the findings in the report to set terms that reflect the customer’s risk.

PPSR registration. If you're supplying goods on retention of title, or leasing equipment, register on the PPSR. Timing matters. A security interest against a corporate grantor should be registered within 20 working days after signing the security agreement, or more than 6 months before insolvency. For PMSI super-priority, inventory must be registered before the grantor gets possession, and non-inventory PMSI within 15 working days. Registration outside these time limits may result in the loss of PMSI super-priority.

Personal guarantee from a director. A guarantee turns the director's personal position into a backstop. It only works if you actually run a director credit check before you accept it, and if the guarantee clause in the credit application is properly drafted.

Trade references, properly checked. Ring them. Ask what the credit limit is, what the terms are, and whether the account is current. If the referee cannot confirm those details, treat the reference as inconclusive.

If the safeguards fail and the customer still stops paying, here's what the recovery process looks like.

A useful credit application gives you enough information to assess the customer and pursue the account if it goes unpaid. At a minimum, it should capture:

• Correct legal entity name, ABN and ACN, and trading names.

• Registered office and principal place of business.

• Named directors, with dates of birth for a director credit check.

• Two trade references and the customer's bank details.

• Written consent to obtain a credit report and to list a default if the account goes unpaid.

• Personal guarantee clause, signed and dated by each guarantor.

• Retention of title and PPSR consent where you supply goods.

• Agreed credit limit, payment terms and a clear statement of interest and recovery costs on overdue accounts.

The consent language matters. Our legal and compliance framing covers the disclosure side. Get the form itself reviewed by a lawyer before you roll it out. This is general information, not legal advice for drafting.

A bad report isn't automatically a lost sale. Your options, in order of caution: reduce the credit limit, shorten terms, require a deposit, move to cash on delivery, or decline the account. Explain the decision in one line and move on. Businesses with clean books are used to being asked.

If you've already extended terms and the invoice is late, the sequence is straightforward. Start by calling the customer about the overdue invoice. If it remains unpaid, issue a formal letter of demand before deciding whether to place it with a collection agency. If the debt is disputed or the debtor ignores demands, court action becomes realistic. That's where an agency with an in-house law firm matters, because the file doesn't have to be handed to an external solicitor and re-briefed. E C Legal is eCollect's in-house team, which is why litigation on a placed file moves without the usual handover delay.

Prevention is cheaper than recovery, which is the whole point of running the check before the invoice goes out. If you're past that point and the account is already overdue, the next step is a straight commercial assessment of the debt. Send it through the free debt appraisal and we'll tell you what's worth pursuing and how. This page is general information and not legal advice.

• OAIC: Repayment history and defaults

• OAIC: What stays on a credit report

• ASIC: Company and organisation registers

• PPSR: Timing rules for registration

• ATO: Disclosure of business tax debts

• eCollect: Legal and compliance