5 step guide to business credit scores

Nic Gidaracos - 11 May, 2020

We share 5 simple steps to help make sure you make the most out of using credit scores and show how they can positively help you and your business.

Credit Scores help you to avoid blind spots

A slick website, great looking business premise or professional staff don’t always provide the best picture of how solid and secure a business is. Far better indicators are how well a business pays its suppliers, how effectively they manage cashflow and how sound leadership at all levels within the business is, however small or big. But it often takes years of dealing with a business to really start to understand these factors well.

The opportunity to sign new contracts, supply new goods or services and grow your own business can often see opportunity outweigh risk. That is why credit scoring your new and existing suppliers and clients can prove invaluable in helping you to make better decisions based on this vital information.

Only 13% of financial decision makers in UK SMEs could correctly identify all the key factors that influence the credit rating of a business, according to a survey conducted on behalf of a major UK ratings agency.

Better business intelligence provides more time to grow your business

Focus more attention on growing your business securely. You can do this by transacting with good upfront knowledge and regular updates on any changes in status of your suppliers and clients. Any quality credit scoring service will allow you to get a ‘snapshot’ view of the business you are checking, as well as provide a solution that updates you on changes to their status too (read more below).

With this process being largely automated, you can trade safer and allocate more resources to growing your business, while protecting the bottom line too. You’ll be able to focus your resources on meeting new clients, following up for return business with existing ones and also make inroads into new areas of growth.

Good credit control and procedures improve your borrowing options

Even if you don’t have a credit control function, being able to evidence good practices like checking the company credit scores of the business you deal with can enable you to secure better borrowing terms. 

In addition to bad debt protection in the form of invoice insurance (see www.invoiceinsure.co.uk for more info) it is very common for lenders to want to understand how you manage counterparty risk before you can qualify for finance. Without good internal practices like making use of credit scoring you may face limited borrowing options. The knock-on effect being the potential to negatively impact cash flow and restrict growth. With credit scoring procedures in place, you open up new opportunities to dynamically grow your business.

You’ll be kept in the loop about changes to the financial health of your clients

As noted above, a quality credit scoring service will allow you to get a ‘snapshot’ view of the business you are checking, as well as provide a monitoring solution that updates you on critical changes, such as improved / worsened credit scores, CCJs (county court judgements), late filings and poor payment practices. You can then make better decisions on whether or not to do more business as a supplier or client’s status changes.

Credit scores help bring peace of mind

Credit ratings aren’t the silver bullet, but they are a relatively low-cost way to ensure you are working smart and are also foundational to good internal credit management.

Being at the helm of an ambitious company can be incredibly stressful at times and very rewarding at others. But no matter what stage your business is at, there will always be a long list of tasks that need taking care of. Make one of those critical tasks work for you rather than the other way around! 

We’d be delighted if you signed up to our free credit scoring app – it’s a simple process and the Credifolio app is available on both the App Store and Google Play.