When you’re expanding your business and working with new companies, you want to be confident that anyone you deal with has a good payment history. Credit report can help provide this.
Credit reports give you a realistic picture of a company’s finances and lets you make informed decisions based on facts. While credit reports are an out-of-pocket expense, a relatively small amount of money upfront might save you hundreds or thousands of dollars by avoiding late or non-payments.
Xero has teamed up with Equifax, a leading credit reporting company, to share six key points on what you’ll learn through credit reports:
- A credit score is an indicator of future risk
It will help you understand a company’s payment history, defaults, and if they’ve got any legal actions against them.
- You can identify any financial distress
You’ll see any trends in late payments, if they’re selling off assets or if they’ve had any staff cuts.
- You’ll be able to ensure that a company is real.
- If a credit report has any warning signals about a company
You can consider how you set out your payment terms. For instance you can ask them to pay 50 percent upfront or cash-on-delivery.
- You’ll know who you can loan money to, how much and when to stop.
- You’ll be able to have the right payment conversations early on in your business relationship
This can help you reduce the chance of misunderstandings in the future.