Managing credit ratings in business

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Such credit decisions are increasingly becoming important in the viability of businesses and under current economic conditions, more businesses are likely to need financial help to keep operating, however not all can receive such help because some have adverse credit profiles.

The biggest contributing factor is that many businesses do not know what affects their credit profile, negatively or positively. The basic imperative that businesses need to understand is that, even though the requirements in the application process for individuals and businesses differ, similar evaluation principles still apply, especially payment history and the way one conducts one's financial affairs.

The best approach to maintaining a positive credit profile is for a business to follow some of the following simple principles:

Simple principles

• Maintain a record of the business' financial obligations in order to understand what one owes and owns
  
• Prepare financial accounts for the business - there are free products in the market to help one do this
  
• Monitor one's credit profile through South Africa's credit bureaus. This prevents surprises such as listing of inaccurate or adverse information
  
• Keep up to date with credit repayments to ensure that one's credit record is in good standing
  
• Pay suppliers on time to prevent the risk of being listed as a non-payer or slow payer. Neglecting this could taint the reputation of the business.
  
• Do not take more credit than one can afford. Even though financial institutions are likely to pick up any potential risk of over-exposure, the business has a responsibility to ensure that it is able to meet its credit obligations.

Any business that wants to operate in a sustainable manner needs to adopt tested measures to maintain its credit worthiness. It is important to remember that a positive credit record is a key factor to unlocking the growth potential of a business.