The majority of Britain’s SMEs ‘lack credit awareness’

Small and medium sized enterprises (SMEs) need to get their SEO and content in order but it seems they need to equip themselves with other skills too. The credit reference agency, Experian, has found that the majority of Britain’s small and medium sized enterprises SMEs lack credit awareness. Experian conducted a poll of 700 UK SMEs  and found that 71% of businesses do not check their customers’ credit status.  Experian pointed out that this exposes the businesses to a greater risk of being either paid late or indeed not being paid at all. The SME survey also revealed that 39% of smaller firms were not fully abreast of what a credit score actually was, while an alarming 61% had never thought to check their own credit score.  The implications of a low credit rating can be that an SME’s ability to access finance or attract new customers can be compromised.  Additionally, a low credit score can force suppliers to impose tighter trading agreements.  Commenting on the findings Mr Simon Streat, the managing director of Experian’s UK SME business stated: “Simply taking the steps to check the credit score of firms before doing business with them is straightforward and affordable, and it could make all the difference.” He added that “Two thirds of small businesses may be blind to their credit scores, but their larger customers, suppliers and banks certainly won’t be.”

The impact on a credit score are incomplete accounts, a location change, the move from non-limited to limited status, or mergers and acquisitions. SME firms will be better equipped to take action to boost their credit score and improve the external perception of their business by engaging proactively with credit reference agencies. Firms should be aware of how credit scores work particularly when engaging with invoice factoring.

 

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