Why Are Credit Checks Critical for Small Businesses?

Posted by Sharon Sheather on Oct 15, 2018 4:26:00 PM

Why credit checks are critical for small businesses

Big data is changing the way businesses operate – providing an additional layer of intelligence to help smart companies, regardless of their size, stay ahead of the game.

One example in the current data rich environment is the multiple data combinations available to provide useful insights to businesses seeking enhanced risk assessment. A sudden deterioration of payment behaviour is one of the leading indicators of business failure, and it becomes much more powerful when combined with industry analysis, location data, financial statements and other signal intelligence.

These forms of due diligence have become de rigeur among large corporations. Given their increasing availability, and the cost benefits they provide, there is no excuse for smaller businesses failing to use similar checks and monitoring tools.

At the most basic level, there are a few simple questions every business owner should ask before extending credit to a new supplier or customer:

  • Are other companies currently attempting to recover an outstanding debt from this business?
  • Are overdraft and other finance facilities reaching or at their limits?
  • Does the business have sufficient working capital, healthy cash flow and a history of trading profitably?

One of these on its own may be concerning, but a combination of these factors can amount to a serious red flag for your credit assessment protocols. These represent the most basic checks, however, and savvy businesses know that regular tracking and reviewing of client portfolios is the best way to protect against over extending credit in risky areas.

Conducting proper credit checks and analysis before starting a new business relationship can save a lot of pain further down the track. Find out how illion can power your business, contact us today.

Find out how illion can power your business as you navigate the future of commercial credit assessments

Topics: Small & Medium Businesses