Did you know that your business – even the smallest company – may have a credit score that can affect its success and may contain errors? If you are not nurturing your credit score, you could be losing opportunities for financing, new customers, and credit with suppliers.
It is common practice for businesses to check customer credit reports, but how often do you review and update the current state of your company’s credit profile?
Knowing your credit profile lets you understand how business customers, lenders and suppliers view your organization. Any company wanting to do business with you is going to want to minimize their risk with a reassurance that your operation is financially sound.
That’s why, just as with your personal credit report, you need to be on top of what is in your business credit file. If your company is in good standing, is free of legal hassles, and has a good reputation, your credit file has the power to work for you.
A good business credit score can lead to lower financing costs, on loans and credit cards, enable your business to qualify for better credit terms from suppliers and lower its insurance premiums.
Of course, this pendulum swings both ways. Negative information, even if it is false, can leave your company with higher interest rates, lower credit limits, and elevated insurance premiums, plus a loss of revenue if customers decide not to risk doing business with you.
Information in a business credit report is gleaned from a wide variety of public and private sources. Depending on how comprehensive the report is, credit reports from agencies like Dunn and Bradstreet (D&B) and Veda can include:
- Business Summary
- Corporate Relationships
- Payment History
- Public Filings
- Financial Statements
- Scores predicting likely business failure or late payments
- Industry payment benchmarks
- Credit limit recommendations
How to Determine if Your Business Has a Credit Profile
To find out if your company has a credit file, simply call or go online to Dunn and Bradstreet or Veda and ask. If you are checking the profile of another business, there are various reports with prices based on their depth and comprehensiveness.
If you discover that your company doesn’t have a credit file, the following five steps can help you get started:
- Open a commercial bank account in your business name.
- Transfer at least a couple business expenses — such as phone and Internet bills — into your business name and pay those bills out of your commercial account. Obviously, you want a spotless record for on-time payment. This generates positive feedback that populates a business credit file.
- Over time, transfer more business expenses into your business name and pay for them out of the commercial account. A good policy might be to transfer a few accounts each month. Just don’t get overextended and end up with black marks on accounts that bear your business name.
- Other than bill paying records, your business credit file will eventually include information gleaned from public and private records, such as how long you’ve been operating, contact details, parent-subsidiary relationships, affiliations, number of employees, etc.
- Update and monitor your credit file regularly. Some credit agencies have a do-it-yourself update system that you can use to keep a close eye on the information that shows up, add data and correct errors.
You may also want to call D&B to request a DUNS number. That is a unique nine digit number assigned by D&B and widely recognized as a means of checking out your business. Companies that want to work with you might ask you for your DUNS number. By getting a DUNS number, your business becomes part of the company’s searchable database that includes more than 140 million businesses worldwide.
When checking your credit profile for accuracy, look to see what isn’t there. Your company may have a developed an impeccable payment history with a supplier or vendor that doesn’t show up in your credit history. You can call the credit agencies and provide them with the data. You can also contact the supplier or vendor and ask them to report your credit. If you’re a good customer, the supplier or vendor will probably honour your request.
What to Do if Your Business Has a Bad Reputation
Even inaccurate, negative information on your credit report can keep others from doing business with you. That’s why periodic monitoring of your credit file entries is vital. If you find inaccuracies, call the credit agency and provide the correct information.
Just as with personal credit, the most important thing to get back on track is to pay bills on time. So beware of overextending your business commitments. Get, and keep, payments into the manageable category.
If the problem is cash flow, get it under control by vetting credit customers more thoroughly. Use the same credit reporting agency that others use to check out your business when deciding whether or not to extend credit.
Consult with your adviser on keeping your credit profile pristine and up to date or contact Commercial Associates for more information on your credit score on 02 9299 1200.