What happens when you don't perform credit checks on businesses
Keeping an eye on your own company’s credit is important, but it’s just as important to run a business credit check on any company you plan to work with. This blog will explore the potential risks and consequences of not conducting credit checks on businesses and why skipping this crucial step can lead to issues such as cash flow issues, increased likelihood of bad debts, and harm business relationships.
The importance of understanding a company’s business credit check before entering into agreements
The reason it is so important to understand a business credit check of a company before agreeing to do business with them is because, ultimately, the success of your business depends on a good cash flow.
Not only do your decisions impact this, but the decisions of any business you work with will also have an impact. If a supplier you work with is in trouble, you might not be able to deliver the promised goods. Similarly, if a client doesn’t pay their bills, your own company might struggle to pay its bills. So, working with any business that you’re not sure is 100% reliable is risky.
It’s good to know how regular credit checks can safeguard your business from financial pitfalls. Here are some of the ways in which running a business credit check will benefit you and your business.
Advantages of conducting business credit checks
There are many advantages to conducting a business credit check on a company you are about to go into business with, such as:
Cash flow of your own company
By being able to understand the financial health of any other business you may wish to work with, you can guarantee (or at least minimise) the risk of being left with unpaid invoices or late payments.
Avoid untrustworthy businesses
Small businesses are more likely to be scammed than larger ones, so you need to be especially sure that those you’re working with are who they say they are. A company credit check will help you to determine whether a company is legitimate or not.
Protect your own company’s reputation
Your reputation is defined by a whole host of factors, who you work with being a key one. Being associated with the wrong company can have a huge impact on the success of your company - in the same way that another company’s financial troubles could have a negative effect on your own.
Make informed decisions
In order to make smart decisions about the future of your business, you need to have information about who you’re working with. Are your clients or suppliers trustworthy or do you need to look elsewhere?
You can’t know any of this information without undertaking your own research. Don’t rely on word of mouth alone.
So, now you know why conducting business credit checks is important and you know about the various advantages. It’s time to take a look at some of the factors that influence a credit score, and how to actually conduct a credit check.
How to check a business credit score
The easiest way to check a business credit score is to invest in business credit check companies. Here at Creditserve, we offer a variety of bespoke packages that cater for your company’s specific needs. All you have to do is select the package that works for you and checkout. We’ll do the hard work and get back to you.
All of our packages are valid for 12 months from the date of purchase. If you’re not sure which package to go for or need a little more advice on how a business credit score works, reach out to our team and we can provide a quotation or a free demo of our online credit checking system to see for yourself.
If you’d prefer to run a credit check entirely yourself, the best way to do so is to order a business credit report. A score from 0 to 100 will be issued and you can then do with that what you wish.
Factors that influence a credit score
The score is a measure of how trustworthy the company is, based on its past actions. The following factors are taken into account when a credit score is being conducted:
- Number of years in business
- Payment history
- Age of credit history
- The industry that the company operates in
- Credit utilisation rate.
As you can see, conducting credit checks on businesses is absolutely vital in ensuring that any company you work with is legitimate and can be trusted. Order yours today for your own peace of mind, or get in touch with us at Creditserve on 01992 414222.
