Just as you need to keep an eye on your customers’ credit rating, your suppliers are likely to be doing the same for you. If your credit score slips below 80, red lights will start flashing. Interest rates might go up, the bank will start to ask questions, lenders might call in their loans, suppliers may withdraw credit. The life of your business will get a lot more difficult.
What Affects the Business Credit Rating?
You are probably aware that you need to make payments on time and keep on the right side of the law and regulation. You may not realise that the rating agencies also consider the age of your organisation, its structure and the sector in which you operate. If the sector has been badly hit by the recession, no matter if you are still trading strongly, you will be tarred with the same brush.
The sole trader is not looked on favourably, nor is a company with only one director. If something happens to that single person, the business is likely to fold. Similarly, if you have more than one director but one of them has been associated with a failed enterprise in the past, the business is likely to be marked down.
Do the Corporate Rating Agencies Make Mistakes?
This may not happen often, but it is always a possibility. If you provide a service to a struggling business sector, you might be listed within that sector and down-rated accordingly, whether or not you have other, healthier customers, or have diversified to meet the prevailing market conditions.
What Should you Do?
Check your credit report and status regularly. Try to form a working relationship with the agency, so that as your financial circumstances change, you can explain your reasons for taking certain actions. Discuss credit rating issues with your outsourced bookkeepers, and together you can keep your credit rating as high as possible.
Lynn Watson is the Director of Office Assistants, a company that offers small to medium businesses of all types the chance to cherry pick from a flexible range of services including bookkeeping; VAT; Payroll; CIS returns and general office services. The company has 20 years experience and pure expertise in streamlining and making substantial savings for all types of Essex and London businesses from sole traders upwards. For more information visit http://www.officeassistants.org