Creditsafe, the business intelligence experts, has launched a new guide for businesses to help them understand how to build a strong credit record.
Having a credible credit record enables businesses to demonstrate solvency, secure funding and build strong business networks with suppliers and customers. It is particularly important in a recovering economy to improve the quality of data available regarding business solvency and ensure the relevant agencies that assess this data have sufficient access to this information.
The guide addresses some key questions that businesses should ask about their credit rating, such as how to avoid building a poor record in the first place, what to do if you find out that you have a poor record and how to rebuild a more healthy rating.
The need to address business credit rating is becoming more important in line with the volume and types of data that are used to calculate a business credit record. Credit reference agencies constantly source fresh information to build up a picture of a company and analyse its creditworthiness. Increasingly, they work with third parties and companies themselves (via their accounting systems) to collate data that will help them assess an organisation’s financial well-being in real-time.
Rachel Mainwaring, Operations Director of Creditsafe said: “There are many companies that have had their fingers burned by businesses who have gone into insolvency owing money during the recent recession - and who are now more cautious who they trade with as a result. It is even more important in this post-recession environment to be able to demonstrate a good credit rating, no matter how close or long-standing your relationships with clients or suppliers are.”
Creditsafe suggests that organisations take the following actions to improve their credit record:
1. Improve the transparency of the financial data you make available: share as much data as openly as you can
2. Pay your own bills regularly and on time: companies that change payment patterns are often demonstrating early warning signs that they are in trouble
3. Pay suppliers within agreed timescales: stick to terms and conditions
4. Check your suppliers’ credit records carefully: their ability to deliver on time will impact your own credit rating
5. Check out your existing and potential customers on a regular basis: even if you have long-term relationships with customers and have had no problems with them in the past, circumstances can quickly change
6. Be on the lookout for suspicious behaviour: Creditsafe’s Safe Alert service will highlight you to any potentially suspicious behaviour
7. Ensure that everyone in the business has access to credit information: make credit checking part of everyone’s day-to-day work
8. Have a stable board: constant board changes are a red flag to credit reference agencies
9. Make sure your accounts are audited: it’s always preferable to have your financial accounts audited than not
10. Check your own record regularly: agencies change their credit rating algorithms on a regular basis to take account of economic conditions and data availability as well as to improve levels of predictions of insolvency
For more information on building a better business credit rating download our full guide.