Simple Tips to Improve Your Business Credit Rating


Your ability to keep your business afloat depends on how well your business is able to generate money. Oftentimes, businesses have to tap into external credit sources to finance their operations and that often hinges on whether that business has a good credit rating.

A good credit rating means you are able to clear debts quickly and pay your bills on time. It is a trust factor. With good credit rating, both financiers and other businesses will be willing to readily trade with you and offer you goods on credit.

Some suppliers reward good credit rating and might be willing to offer you even more favourable payment terms. When it comes to accessing finances, lenders generally offer easier and better access to capital and credit to businesses that have good credit profile. But how can you maintain or improve your business credit rating?

Review your credit rating on a regular basis

To ensure you are not slipping off rails of good ratings, it is advisable to review your credit ratings on a regular basis. You can pay a credit scoring company to do this and send you quarterly reports. If you notice a drop in your ratings, get in touch with your credit scoring company and inquire why this is the case.

It may not always be due to a bad credit habit. In some cases, credit scoring companies make mistakes that impact your credit rating and they are obliged to rectify these mistakes if you raise an alarm. For example, some vendors will report you to a credit agency if you purposefully withhold their payment for perfectly legitimate reasons.

Make Payments on Time

Your credit rating is ultimately pegged on your ability to meet your payment obligations on time. If you see your credit rating dropping, perhaps it is time to evaluate how seriously you treat your debt obligations. Install a good accounts payable system in your business so that you can keep tabs on your bills. To be on the safe side, you will have to consistently pay your debts on time.

Watch your cash flow closely

You can only meet your debt payment obligations if you have the cash flow to foot the bills in the first place. Whenever you run out of the cash and begin defaulting on debts as a result, your credit ratings are going to take a big hit.

There are various strategies you can use to ensure constant cash flow for your business. One is an efficient invoicing system that ensures your business is paid on time for all deliveries made. Small businesses, particularly, cannot afford to have too many delayed payments. Have favourable invoice payment terms and follow up regularly on unpaid invoices. Cash flow forecasting can also help you forestall some of the future cash flow problems.

Do customer credit checks

It is inevitable that some of your customers are going to have a poor credit history. To avoid running into cash flow issues, it is prudent to have a good balance of customers with good and bad credit records. Ideally, the bulk of your customers should be those that have an excellent credit profile. If some of your customers have a bad credit history, be reasonable about the amount of business that you can do with them in order to provide a buffer for your business against potential future defaults.

Outsource your bookkeeping and accounting

A good way to keep tabs on the income and outgoing payments and keep better tabs on your cash flow is by outsourcing your accounting and bookkeeping needs. A professional accountant Melbourne expert can offer you diverse accounting services that will help you watch your money and meet your payment needs on time and this will boost your credit rating. You can also use cloud-based accounting tools to keep track of your invoices and payments.

Just be honest

In business, honesty is often a good policy. If your cash flow has taken a hit and you are unlikely to fulfil certain debt obligations, it is prudent to simply inform your creditors beforehand and negotiate for more favourable payment terms instead of making empty payment promises. If you have had a smooth relationship with your creditors in the past, they won’t have a problem offering you more flexible payment terms.

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