23rd August 2017
Business advice
Nicola Roby
Whilst many of us worry about our personal credit ratings, when it comes to business, it doesn’t gain as much thought, despite it having such a big impact. A poor credit rating could; impact your ability to raise finance, the credit terms you’re offered, or even the suppliers that will deal with you.
In a survey carried out by Experian, which unveiled several insights into SMEs mindset around finance it found that only 13% could correctly identify the factors that could influence the credit rating of their business.
More worryingly, it revealed that almost 60% of small firms had never checked their commercial credit rating, therefore no grasp on its accuracy.
Whilst it’s good practice, and recommended that you’re aware of your credit score, many small businesses get into turmoil when a customer is unable to pay their debt, therefore as a small business, you should really be credit checking your customers’ financial risk position to be able to judge whether they will satisfy the debt.
Nicola Roby, Director at Bolton-based accountants CHW, sets out her top five tips to help your credit rating shine:
Whilst early filing won’t help much (apart from appearing well organised), filing them late has a substantially negative impact. From an outside perspective, it just looks a little untidy from a business administration point of view.
If you could delay a dividend, or collect payment early, they could improve your year end position, and make it look like a slightly better position in which you ended the year on.
If you find yourself with a County Court Judgement try and clear it, or seek professional advice immediately. If someone is performing a credit check and a CCJ is on your record, they’ll be alarmed.
If you’re looking at funding, or applying for credit, make sure you discuss it with a funding expert. Not only will you spend lots of time looking at the deals available on the market, but you could be harming your credit rating with each application. A funding expert will know how to approach this and not make unnecessary footprints on your credit file.
There are methods (some are free), which allow you to review your credit rating and receive notifications when it’s impacted. We strongly recommend reviewing it each quarter, or before significant events, to ensure you’re presenting yourself in the best light.
Whilst your credit rating may not suddenly improve overnight, it’s something that should be on your agenda to slowly improve your rating.
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