Asked for a list of business priorities, most SME owners probably wouldn’t put “managing my commercial credit score” anywhere near the top. Those who don’t pay attention to this increasingly important indicator of their firm’s financial health are missing a trick.
Commercial credit scores are a key part of the application process for everything from bank loans to rental agreements and utility packages. They are also important for new business generation; many tender processes now take a potential supplier’s score into account before agreeing a new relationship.
Businesses are much more likely to be able to negotiate lower prices and better terms if they are classed as a “safer” bet than other firms.
There are several steps that business owners can take to improve the way they are perceived:
- Check your own commercial credit score every six months. Get your own report and ensure it reflects your circumstances.
- Pay your invoices on time. Monitor your customers and take action if they are falling behind. By checking customers’ payment performance information you can help protect your business from potential cash flow issues by being aware of potential delays in payment and planning for them so you can continue to maintain your own commitments.
- File annual returns and financial accounts on time. Late filing of accounts can be a sign of financial distress. If you know your accounts will be late, consider filing partial rather than full accounts, so that any potential misconceptions can be rebuffed.
- Avoid County Court Judgments (CCJs). If one does occur, ensure it is settled within the month. In the past, one CCJ would not necessarily involve the withdrawing of credit lines, but it is more likely to have a greater impact in the current climate.
- Manage your personal finances as well as you can. If financial data on a business is scarce, consumer data is a valuable indicator of financial health for small and newly formed businesses.
- Tell your utility suppliers when you move premises. Ensure any utility bills are paid in full as outstanding bills will go against your record.
- Make sure your business is on the map. If your business falls below the radar you could struggle to gain access to credit and services as your existence cannot be easily verified. Non-limited businesses should consider registering with a credit reference agency or a business directory such as Thomson.
For more information on managing your commercial credit score visit: www.experian.co.uk/business-express.html