7 business risks you can reduce with credit checks

Posted on by Cindy Yip

Estimated read time: 5 mins

When you’re running a business, risk is inescapable. Employing staff presents risk, buying or renting property presents risk, even working with clients can present risk! Recent research from insurance company, Zurich has shown that two-thirds of SME’s know of businesses that have had to close down because of cash flow problems, resulting from overdue payments 1. The key to success is being able to manage and mitigate these risks by identifying them and putting processes in place to reduce them or avoid them completely.

So, how can the risk of overdue payments be managed? Business can’t simply stop working with clients after all!

Here at Experian Business Assist, we’re passionate about helping businesses to reduce risk through access to valuable data which can give them insights into their clients, suppliers and even their own business. There’s a saying that ‘information is power’ and here are just a few examples of how that is true when it comes to credit checks…

1)     Bad debt

Perhaps the most obvious benefit of credit checking is the ability to check the previous payment behaviour of potential clients and in doing so, identify how much of a risk it would be to work with them.

This is an incredibly valuable tool and is vital in helping businesses to reduce their risk of overdue and missed payments.

2)    Reputational damage

Credit checking also allows you to get real insight into how businesses run their financial affairs – whether they have county court judgments or even bankruptcies on their records. It is also possible to access details on directors and the people behind the business, so you can be absolutely sure before you choose to associate your business with another.

3)    Existing debts going bad

Of course, credit checking isn’t just useful with potential clients, it also provides huge benefits in managing existing client relationships. By monitoring your clients’ ongoing financial situation, you are able to flag potential risks or changes in their payment behaviour. This in turn means that you can take appropriate action beforehand to help prevent existing client relationships turning sour.

4)    Expensive debt collection

Whether you manage your credit control in-house, or use a third party debt collection agency, the process of chasing unpaid invoices is time consuming and costly. A simple credit check can help you to greatly reduce this unnecessary outlay and to focus the time and investment on something more valuable to your business.

5)    Unknown financial difficulties in your own business

Credit checking doesn’t just allow you to monitor the financial position of your clients and potential clients, but also of your own business. By regularly checking your own credit report, you can see the information that your lenders are recording about you and your business and can manage your information to ensure that you aren’t viewed as a risk by your own suppliers and lenders.

6)    High credit rates

Should you choose to seek investment or apply for credit, then your own credit report will play a key role in the rates you are offered. The ‘cleaner’ your report, the more favourable the rates you will have access to.

Regularly checking your report allows you to stay on top of any potential issues so there are no nasty surprises next time you apply.

7)     The risk of rejected credit applications

Perhaps worse than being offered high rates, is being completely declined for credit or investment because your credit report identifies your business as high risk. Sometimes this can happen due to something you were completely unaware of – perhaps something easy to resolve. By checking your business report regularly, you can manage any problems and then apply with confidence.

How to get started

Now that you’ve seen the huge benefits of credit checking, you may be wondering how it all works.  The good news is, here at Experian Business Assist, we can show you. Our service gives you access to both your own business report and those of any UK company – and we offer a free trial! Click here for more.

In a world of business risk, let us help you to reduce a few.

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