Maintaining Creditworthiness

Every business should have a solid plan that consists of safeguards that will help you to maintain and ultimately improve your business credit reports and ratings.

Monitoring Cash Flow

The single most important factor in being able to pay your monthly obligations on time is your cash flow. Ensuring that you have the money when you need it can make a huge difference in the success of your company and the strength of your large, medium or small business credit profile.

Here are some helpful tips that will assist you in successfully managing your cash flow and building business credit:

• Use Accounting Software : Managing your cash flow is much simpler when you take advantage of software designed especially for this purpose. Programs such as Microsoft’s Office Small Business Accounting or QuickBooks have many cash flow features that can help coordinate your accounts payable and receivables and predict the periods of high and low cash flow in order to allow you time to make necessary adjustments.
• Collection Policies : If your business involves selling to customers, and you give them certain payment terms and conditions, it is imperative that you collect the funds owed to you when they are due. Business trends have shown that the longer you wait to collect, the less likely it is that you will be paid. In order to keep your own cash flow on track, it is necessary to implement collection practices including monitoring your accounts receivables, calling on past due accounts, and enlisting the help from a collection agency if absolutely necessary.
• Immediate Payment on Accounts Receivables : Rather than running around chasing customers who are late on their payments, consider becoming an authorized merchant in order to accept credit card payments. While you will pay a fee to be able to accept credit card payments, it may be worth it to avoid the aggravation of collecting on past due accounts. There are also other immediate forms of payment, such as checks, money orders, and PayPal (www.paypal.com).
• Increase Your Prices : Often small businesses are hesitant to increase their prices on goods or services for fear of losing valuable customers. However, if you are under pricing these goods or services, it could have a significant impact on your earning potential. For instance, if fuel prices have gone up, and this has had an impact on the cost of producing your good or providing your services, you should seriously consider increasing your prices in order to recover some of the increased costs from your customers.
• Be Selective About Your Customers : One of the most important decisions you can make as a small business owner is who you choose to do business with. Engaging in business with customers who will pay you in full and on time is critical. In order to ensure a customer’s credit worthiness, you may want to consider checking the credit history of any potential customer before getting into a situation where they owe you money. In addition, many of the credit reporting agencies offer small business credit monitoring services that will alert you if there are any significant changes to the credit profile of any customers you have requested business credit reports for in the previous year. D&B (http://smallbusiness.dnb.com/credit-reports/browse-products.asp), Credit.net (www.credit.net), and Experian (www.experian.com/b2b/?hs99=1954) provide business credit reports on millions of companies and include email alerts.
• Reducing Expenses : One of the most effective ways to increase cash flow is to decrease expenses. By regularly scrutinizing expenditures and making cuts when possible, even small changes can add up to significant savings over the course of the year, which can have a positive impact on your overall cash flow.
• Communicate with Your Creditors : If your cash flow issues are making it difficult to meet the agreed upon terms with your creditors, it is imperative that you contact your creditors and either request an extension or renegotiate the terms of your payment agreement so that they line up better with the timing of your accounts receivables. For instance, if you agreed to net 30 days with one of your vendors but realize that you will not receive payment from one of your largest customers for 45 days, try to negotiate net 60 days so that you have sufficient time to collect the payment from your customer and make the appropriate payment to your vendor.

Safeguard Against Business Identity Theft

While individual identity theft is more common, it is also a growing concern for businesses. In the past few years, there has been an increase in attacks on businesses in order to:

• Steal company documents such as stationary in order to request or divert products and supplies that the genuine company will ultimately be billed for.
• Access business bank account information in order to use company credit.

The impact of business identity theft is wide reaching. Not only can it negatively impact your business credit report and overall profile, it can also have a potentially negative impact on your company’s brand and/or reputation.

In order to avoid business identity theft, take steps to protect the information contained in your computer systems and guard the important documents kept on the premises. It is even important to safeguard your garbage if bank information and other sensitive information are being thrown away. A shredder is an excellent way to ensure that your company’s sensitive information will not be accessible.

The Better Business Bureau has more tips on avoiding business identity theft at www.bbbonline.org/idtheft/business.asp.