A friend of ours is planning to put in a new kitchen.  Like all domestic projects, he and his wife have gone out to a number of local kitchen companies, had them visit the premises, prepare drawings and obtain quotes.  Whichever way they cut it, they look like they are going to end up spending something in the region of £25,000 on their new kitchen and all the companies who have put forward proposals for this work have asked for a deposit in advance of the work commencing ranging from 25 to 50%.

I happened to mention to them that someone else I know was recently carrying out some work on their house and paid a deposit only for the company to go into liquidation and for the deposit to be lost.

It really surprises me, in the current economic climate, with people being prepared to spend sizeable sums on their homes that they don’t spend just a few extra pounds on obtaining a credit report on the companies with whom they might be instructing.

A credit report can show some warning signs that can make you think twice about who you deal with and should be a factor in making the final decision.  The report can provide you with a credit rating on the company together with an indication of their financial stability.  Sure, it is no guarantee of solvency, but it can give some clues and can lead you to asking further questions.

My advice is whenever you are thinking of spending some serious money even in a domestic situation; obtain a credit report on the company before you part with any money.

 The use of credit reports to check on companies you trade with is an essential tool in managing your business successfully.

However, some people would be surprised that many companies regularly check their own company.  There are many reasons why companies do this including:

1.         It is vitally important to see how your rating stacks up.  Do you have a good credit score or are you being penalised in some way.

2.         If for any reason your credit score is lower than you think, there is no reason why you can’t contact the particular provider of the credit report and ask them for an explanation.

3.         As credit reports include considerable information stored at Companies House, it is a useful way of checking that that information is correct.  We know of a number of companies who on checking their director information through a credit report have found that erroneous directors of their company have been appointed.

Keep an eye on your own company as the withholding of credit by a supplier because of  a poor credit check can do as much damage to your business as anything else.

A recent survey has shown that only a minority of companies make company credit checks on suppliers and customers in the normal course of business.

Obtaining a credit report on a company has never been easier with a multitude of suppliers providing analysed data online from as little as under £2.

The information available ranges from accounting and statutory information filed at Companies House right through to detailed credit scores and credit checks based on information drawn from a variety of sources.

Whilst credit scores are a subjective measure, sophisticated software systems have now been able to provide much guidance to users of such reports to at least raise alerts and the need for guidance when dealing with specific companies.

In these difficult times, taking out a company credit report on a potential customer is only the start of the process. Apart from ensuring you implement excellent credit control procedures, regular reports should be obtained as a company’s circumstances can change very quickly.

One way of dealing with this is by making use of Companies House monitor service which for a very low cost, provides an alert by email every time a change takes place on the official record. Whilst Companies House offer this for a low cost, you need to have a monthly subscribed account with them and an alternative is by taking advantage of the same service provided by independent service providers.

The annual Barclays late payments report has suggested that there has been a 20% rise in late payments and bad debts written off in the past 12 months have been almost £5bn – that’s £1133 for every small and medium sized business in the UK.

Government figures are showing corporate insolvencies soaring and many experts in the credit and debt collection sector are urging businesses to instigate proper debt collection procedures to ensure survival.

One way many companies achieve this is by constantly making use of the services provided by company credit report websites.  Checking a company’s credit rating online is now affordable and quick.

The Working Capital Scheme run by the Department of Business and introduced by Lord Mandelson in January 2009 was an attempt by government to boost the amount of credit available to small businesses.

Essentially, the government provided banks with guarantees covering 50% of the risk on existing and new working capital portfolios up to £20bn.

The first £1bn tranche of the scheme was due to be launched by 1 March to support about £2bn of loans for companies with a turnover up to £500m.

All the main banks are taking part in the scheme.

Research has shown that the majority of small businesses do not have the resources to deal with late payers.

It is very rare in a small business that they can afford a credit management professional to chase unpaid invoices.  As a result, small businesses perhaps don’t take advantage of the different risk management services for managing debt such as credit reports, credit insurance and debt collection which are more commonly used by large firms.

As a result, many small businesses are forced to do the tracking down and chasing of late payers themselves which is unfortunate as they could have been spending that time developing their businesses.

The internet has helped to a certain extent with the availability of credit reports online, but many people need to be educated as to the availability of such information and the importance of using it.

For more information on credit control, have a look at our article; Setting up a Credit Control System .

Whilst the Made Simple Group has been around for some years selling through its multitude of websites, the provision of company credit checks online is a relatively new venture having been launched about 12 months ago.  After the success of our first year, we decided to invest further in our systems which has culminated in the re-launch of our website. This has resulted in a vast extension in the number of offerings and what we think is a more flexible, user friendly and intuitive approach to the provision of such data.

Of more importance, we believe our pricing is the most competitive in the market place.

In these difficult times, credit crunch, recession or even the “D” word, the importance of knowing who you are doing business with is paramount.  Using credit reports and having access to information about customers, suppliers and even competitors has never been easier or more important and our new site makes if affordable.

Our blog, which we hope to update very regularly, will also provide useful information and links to what is going on in the business world particularly as it affects the smaller business which is our target market.

We’d love to hear from you and discuss your problems and we are always open to suggestions.

Most of all, the more of us that are successful in business, the quicker wemight get out of the current economic mess.