With today’s competitive and ever-changing business environment, companies have to keep evolving to survive. Remaining…
In essence, credit is a trust that allows businesses to trade with each other on debt with the promise of future reimbursement. It plays a very important part in the day-to-day running of businesses and helps them keep functioning even at times when cash is not immediately available. Credit also helps companies grow by providing capital that can be used to increase production capacity.
The Downside to Credit
Although credit has numerous benefits, it does have two major problems associated with it:
- The Risk of Bad Debt. When you extend credit to a customer, there is always a chance of not getting paid back the money owed to you.
- Delayed Payment. Some debtors will take longer than agreed upon to pay you the money they owe. This affects the company’s cash flow which in turn affects its ability to fund day-to-day-operations.
But even with these risks, businesses still have to extend credit to customers to retain them and attract new ones. Business credit reporting helps reduce these risks by providing the information you require to decide on who to extend credit to.
The Fix: How Business Credit Reporting Mitigates Credit Risks
Business credit reporting is a system that collects debtor data and makes it available to businesses for informed decision making. Credit bureaus (the companies that maintain credit reporting systems) collect information from suppliers and combine this with other information such as court judgements, public notices and debtor defaults to give you a clear picture of your customers’ ability to pay their debt.
With the information you get from credit bureaus, you can decide whether to extend credit to a customer and which terms to use.
Credit reporting provides you with information on:
- The Customers’ Ability to Pay on Time. This will help you make plans to avoid running into cash flow issues.
- The Health of the Business You are Giving Credit to. This gives you insight on the financial health of would-be debtors so as to avoid bad debts due to bankruptcy. This information will also prove invaluable when choosing long term partners.
Credit reporting provides you with adequate debtor information to help you make sound financial decisions, proving true the saying “knowledge is power”.
- Editor Rating
- User Rating
Are you a business owner? Are you looking for more small business tips and branding knowledge? If yes then you should probably subscribe to TLB right away. We promise we won't spam your inbox.
Latest posts by Ashley Bryan (see all)
- When Should You Use Labour Hire Services For Your Business? - August 27, 2017
- Get the Best out of your Talent with These Recruiting Tips - August 19, 2017
- What Does Your Business Credit Score Mean to You? - August 11, 2017
You may also find these articles useful
- The Challenges Of Business Change and Outplacement
- Business Change: The Relentless Requirement To Adapt
The biggest challenge facing businesses all over the world is change. Change relentlessly challenges and…
- Increase In New Business Formations Underscores Singapore’s Attractiveness To International Business Community [Infographic]
Singapore has bounced back from a dip in new business formations posted in the previous…
- 4 Easy Steps To Effective Marketing Strategy For Your Small & Medium Enterprise
Image by Tara Hunt An ineffective marketing strategy can force a business into trouble quicker…
Other Posts by Ashley Bryan
Posts about Brand Development
Posts about SME & Local Business
Could’ve Seen Yahoo!’s Fall Coming From A Mile Away
3 Best Accounting Software Features Your Small Business Needs
Why it’s Good to Go Green: Focusing on Furniture in the Home
How Brexit Affects UK and Europe’s Auto Industry [Infographic]
Modern Changes To The Classic British Pubs
Business Change: The Relentless Requirement To Adapt