Did you know that collaborating with your suppliers can bring a lot of benefits to your company? A business relationship can actually give a business an impressive competitive edge. It is also important to know about the businesses you interact with. Commercial credit reports can be of great help. The SMEs in the UK are owed at least £67 billion of unpaid invoices and this number could be higher considering this number doesn’t involve those companies’ who don’t submit detailed annual reports.
The average waiting period of SMEs for invoices to be paid is currently at 72 days. With the growing trend of late payment and even unpaid business debts, it would be great to take precautionary measures before they start doing business with certain companies. It is important to know that delayed payment affects your business in a significant way and this could lead to the negative overall performance of your business.
Business-to-business (B2B) fraud is a big problem going for a multi-million dollar per year. Luckily, there is technology that provides tools to protect business owners and the most effective one is tracking a business’s credit information. It is worth noting that as a business, if your customers take their sweet time before they pay bills, maintaining a healthy cash flow all the time is not possible and this can lead to business crises in the future.
The time and resources your company spends chasing away late payment and debts can be used in the productive sections of the company. You will also be limited to budget ahead since your cash flow will be affected as well. Check out some of the reasons you should check a company with an aim of protecting and reducing your business’ risks:
1. Getting potential clients
The system enables you to search for any company in the UK or abroad. Vetting your potential customers is good because you will be able to see vital information such as the way they incorporated their financial books, their level of credit risk, the ownership of these companies and any other essential information. With this information, you will be able to know the terms and conditions you will set while doing business with them.
2. Company history and ability to pay in future
A company credit check report is very important because the financial history indicated in it will enable you to know the history of their directors and the previous relationship with other companies they have worked with before. Remember, all the companies you get into business with can never tell you that they are not financially stable and so it is upon you to find out their previous working relationship with their customers. A business credit report is the best way to know if they will pay you all your money at the right time. You will also know about their financial history instantly. Their credit score is enough to shed light on if you should get into business with them or cancel it to protect your business from the risks found in getting into bad debts.
3. Monitoring your existing customers’ credibility
It isn’t easy to monitor more than a few customers and suppliers at a go. Actually, monitoring these companies credibility in terms of their rating and limit is a good way of getting that feeling of doing the right thing while getting into a business relationship with other companies. The most essential thing to do is to add your customers to a monitoring list so that you get a periodic company check and notification in case of any changes in their financial status. The information you will gather out of this will help you to get prepared other than being caught red-handed and this could affect your business in a negative way. Being aware of an incoming risk will enable you to make the required changes and generally be ready. In other words, instead of you constantly checking on their financial reports, if your customers are added to the monitoring list, you will be notified in case of any changes at any time.
4. Are you getting into business with the right people?
You need to know your business partners well including their personal life. You also need to be sure that these people are whom they tell you they are in that particular business. Finding out a little more about them is the right way to go about it. The information you get can save you a lot and protect you from getting into business with individuals who were previously involved with bankruptcy or associated with other companies which can bring the conflict of business at any time. A company check and credit report will enable you to make the right decision with the right facts and protect you and your business from any negative effects whatsoever.
5. Get the right facts about their payment patterns
A good credit report provides the payment performance and the number of days a company takes to pay its invoices. This data is collected from sales ledgers from companies that participate and updates their data on a regular basis showing their payment behavior all the time. The information you gather will give you a clue on how regular they pay their clients, the number of days they take to pay and whether that business is improving or worsening when compared to the industry average performance. From the information, you gather you will be able to know how they will pay you as their client and whether you will get your payment as agreed.
Just like the way you probably check your personal credit report while applying for a credit card, a loan or even a mortgage is the same way a company check and commercial credit report work. The only difference is that on a commercial credit report, you will use your company information instead of your personal information. The information you are likely to gather in a commercial credit report include:
Giving credit to another company without checking a commercial credit report may be the worst decision you will be making as a company. This is because the information you collect here is unbiased and timely ensuring you don’t get into regrettable business deals. The importance of checking other businesses is the best way to make your business decisions. You will get to know the business creditworthiness and if it is possible for them to meet the financial commitments at hand. To have a strong and reliable business partnership, you will need a positive credit score. This will raise your confidence in them and build your work relationship to the next level.
The importance of credit checking your customers will ensure that your company is able to maintain a healthy cash flow. This is very crucial considering that cash flow is the lifeblood of a business and without it, the business stability is questionable. Knowing that your clients will be in a position to make timely payment should be done before getting into business with them in the first place.
Wondering how this is possible? Don’t worry because reports are the best source of information to give you an assurance if a prospective customer will live up to the standards. What about your suppliers? Beware that most suppliers will only reveal the information that casts them in a good light. However, you need to look at their payment performance, their credit score, and their current financial status before doing any business with them.
After that, having a trial and timely payment is also good so that you can have an assurance that their business is doing well. To assess the risk involved in working with other businesses, credit reports are very powerful and cost-effective and the results are not disappointing. Taking a little bit of your time to do diligent company checks before getting into any business relationship could earn you a great investment.
Having someone offering you assistance in your business in terms of quick and easy tools to help protect your business is a great way of getting the peace of mind as a business owner and this for sure is something you desire very much. Be informed to be in a perfect position of making informed choices.
The quantity and quality of the information provided in such report differs from provider to provider. Free company check service providers will put less information at your disposal than a paid company check. Then you might find different information in a company house check and a private service provider. The gov has almost all the information about a business but even so may not be enough. Therefore you might need to get a combined report from a free company check online and a paid service. No matter how many sources you need, one of the information you must draw and measure is if that particular business is likely to become insolvent within 12 months. You will also be able to understand any risks associated with your business partners or even a potential business deal you plan getting involved in. Other vital information is the company financial status which includes cash at bank, net worth, assets and liabilities.
Company check ensures you get instant access to accounting records and you are also able to download full-year figures for internal use in business analysis, marketing and much more. Company check is there to guide you on key risk factors so that you are able to understand the methods used in calculating risks.
If there was a debt settlement via a court, then this may have a substantial impact on the company’s credit rating. The information contained in a company credit check report entails the total sum of debts owed, the dates and values of any paid or unpaid county court judgments against a company within up to the last 6 years.
With this information, you will definitely make the right decision. This report contains the positive, neutral and negative factors. This is the information that contributes to a company’s credit status. You will also be able to know the company’s investors including their name, capital value and share value in an easy to understand graph.
If you want to know how to calculate the credit limits, you are in the right place. The calculation is basically done by analyzing a company’s financial position in conjunction with the risk of the credit rating. Ideally, a company will be assigned a reasonable credit limit if it has a positive rating. The other factors to be included in a positive rating are the company’s net worth, current working capital, net cash flow operations, debtors, and turnover. In case these values are negative, then the credit limit will also suffer.
To operate a business on a day to day basis is not an easy task as it may sound. To achieve a smooth running of the business can be aided by running credit reports on vendors, competitors, and your partners because you will have enough time to dedicate to your business and in return make more profits. To grow a successful small business, it is advisable to take all the necessary precautions. One of the most important steps towards making your business deal a happy one is by checking the credibility of the companies you do business with.
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