In today’s economic climate, knowing your customer is not optional. Rising commercial bankruptcies, slower payments, and increased construction risk have made it harder to rely on history alone when extending credit.
February puts relationships in focus; Valentine’s Day isn’t just for the love of your life. For credit professionals, the strongest relationships are built on clarity, documentation, and enforceable rights. When you truly know your customer, you can extend credit with confidence, protect cash flow, and reduce DSO without damaging trust.
This is the month to take a closer look at how well your credit processes support the relationships you rely on.
Before credit is ever extended, both parties make a commitment, and the credit application is where expectations, responsibilities, and protections are first defined.
Every strong credit relationship begins with a solid credit application. Beyond collecting basic information, a well-designed application establishes payment terms, outlines expectations, and includes security language that allows you to protect receivables if risk increases.
Credit applications should support:
Knowing your customer means knowing what rights you have before you need them.
Ongoing education for credit and sales teams reinforces this foundation. Teams that understand UCC filings, notice requirements, mechanic’s lien rights, and lien waivers make better decisions at the point of sale or time of contract, where trust is built and risk is lowest.
When a credit relationship grows, protection should grow with it, and UCC filings provide a way to strengthen your position without changing how you do business day to day.
UCC filings remain one of the most effective tools for securing receivables. A properly perfected UCC filing establishes priority over collateral such as inventory, accounts receivable, equipment, and other assets. In the event of debtor bankruptcy, priority matters. It can directly impact how much you recover and how quickly.
The protection of a UCC filing also extends to promissory notes. A promissory note reflects intent to pay. A UCC filing adds protection by securing that obligation with collateral.
UCC filings do not guarantee payment, but they do establish priority and leverage if a customer defaults or files for bankruptcy. Like any well-defined relationship, they set clear expectations upfront and stay in the background unless circumstances change.
In construction, knowing your customer means looking beyond the company name and understanding the project structure, funding sources, and contractual relationships that ultimately drive payment.
Construction credit demands a different level of customer understanding. Knowing your customer also means knowing the project.
Preliminary notices are one of the most reliable ways to preserve mechanic’s lien and bond claim rights. When sent correctly and on time, they signal professionalism and substantially improve payment outcomes. Many projects pay without escalation simply because notices are in play.
Payment bonds add another layer of security. Obtaining a copy of the payment bond at the start of a project confirms the principal, obligee and surety, and helps assess overall project risk. Early requests are standard and rarely raise concern.
Lien waivers require just as much care. Understanding when to use conditional versus unconditional waivers, and partial versus final waivers, helps ensure payment is received without unintentionally releasing rights.
Complete job information ties everything together. Accurate owner details, contractor relationships, lender information, and bond data are essential for enforcing rights if a project goes sideways.
In construction, knowing your customer means knowing the entire contractual chain.
Economic pressure tests every credit relationship. Customers who have always paid on time may face new constraints. Projects that once looked stable may encounter delays or funding issues.
Knowing your customer is not about suspicion. It is about staying informed, prepared, and protected. When your credit decisions are supported by documentation, secured rights, and visibility into risk, you can extend credit with confidence even when conditions tighten.
February is a natural checkpoint. Strong relationships are built on attention and care, and credit relationships are no different.
The strongest credit relationships are built on trust and reinforced by protection. Managing UCC filings, preliminary notices, lien waivers, mechanic’s liens, and bond claims internally can increase risk and strain resources. Partnering with an experienced provider helps ensure accuracy, compliance, and consistency across every customer and project.
NCS Credit has helped businesses across the U.S. and Canada protect cash flow through commercial collections, UCC filings, preliminary notices, mechanic’s liens, and bond claims. Contact us to learn how a proactive, well-structured approach to secured transactions can support stronger credit relationships and more predictable cash flow.