There are a number of factors that contribute to running a successful business. If you invoice other businesses, ensuring that you are paid on time will play a critical part as this affects your cash flow, revenue and business profitability. Having a robust credit control process will ensure that your business runs effectively and is not subject to risk.
Credit control involves the process of checking and monitoring a business’ customers and suppliers to ensure that credit is not extended to at-risk or non ‘creditworthy’ customers, to reduce the likelihood of late payments and bad debts.
Credit control is important in safeguarding businesses against the risk of non-payment, late payment and supply chain disruptions. Using company credit checks, you can identify and address potential threats early on. This helps to maintain cash flow, improve profitability and build better relationships with customers and suppliers.
Without an effective credit control process, businesses may unknowingly engage with companies in financial difficulty, resulting in delayed or unfulfilled payments. These situations can significantly hinder cash flow, leading to an inability to meet upcoming financial obligations, pay staff, or execute growth plans like purchasing new stock.
A lack of credit control can impact a business’ credit score if reduced cash flow means they're unable to meet liabilities. This will affect the business’ ability to access finance or negotiate better terms with suppliers. By implementing effective credit control measures, businesses can protect their financial health, ensure stability, and create opportunities for sustainable growth.
When you work with other businesses, it's important to identify credit risks as part of your credit control process, before you enter into a contract or agreement with a customer, partner or supplier.
Running company credit checks will identify any potential risks, so you can make well-informed decisions about whether to work with a company, how much credit you should extend, and whether you should offer long payment terms.
A company credit check will allow you to see the business credit score, credit limit and credit profile. This is an indication of the financial health of the business and the maximum amount of credit you should extend to them. It will also give you an understanding of how the company pays their existing partners, by showing you whether they historically pay on time, late, or very late. You will be able to see any legal notices, such as a CCJ or Gazette Notice, that indicate a business is in financial difficulty,