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Climbing the ratings

Credit scores are widely used by lenders to assess the risk of extending finance to a business. Keeping your rating in the best possible shape will make it easier to take advantage of commercial opportunities and give you access to more competitive lending terms.

The most effective way to build and maintain a good credit profile is to settle bills on the agreed payment terms. Not every business owner realises that credit reference agencies gather data on companies as well as individuals.

It is also helpful to take a strategic approach to credit applications. Making multiple applications that are unlikely to succeed is not only time-consuming – it can also create the impression that your finances are in bad shape.

Don’t be shy

Another reason why a good credit score is important is that suppliers and other potential partners may use it to decide whether to do business with you. It is also advisable to check the credit rating of potential customers as any cash flow issues they face can have a knock-on effect on your ability to pay invoices on time.

The more information credit agencies have about you the better, which includes making sure the information they have is up to date and accurate.

It is also worth building up a track record by paying off your business credit card balance in full every month, for example. This is especially useful if you are a start-up or early stage enterprise with limited trading history.

Watch for fraud

Research suggests that most small businesses never check their credit score and that those who do don’t do it often enough. It is also useful to understand the factors that are monitored to create that score, such as debt judgements.

Checking your credit score on a regular basis is not just about assessing your chances of getting access to finance though – it is also an important fraud prevention measure.

Inevitably, fraud increased after lockdown as people were working from home and the usual methods of checking payments became more difficult to use. An unexpected change in your credit score can be an indication of fraudulent activity and give you a chance to minimise the damage.

Use the data

Businesses that use a cloud-based accounting solution such as Big Red Cloud are better placed to spot any discrepancies between the financial health of the business and its credit score, allowing them to ask the scoring company whether they are being unfairly penalised because a payment was withheld for a legitimate reason, such as a disputed invoice.

These accounting solutions can also be used to automate payments, ensuring that bills are not paid late or left unpaid due to human error. This is particularly important when making payments to utility companies, who are more likely to report late payments.

There are many reasons why your credit score might not be very high. Just remember that suppliers won’t expect you to have a perfect rating.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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