Chart a new course for a stronger business
If you’re like most business owners, thinking about your credit health doesn’t exactly get your motor running. It probably ranks somewhere between doing your taxes and going to the dentist. I get it–it’s a little boring.
But if you make (and keep!) any new year’s resolutions for 2014, managing your business credit should be at the top of the list. Not only is it one of the few things in life you can actually control, but healthy credit can provide some serious peace of mind for your business! And I promise it’ll hurt less than a root canal.
Pro tip: What you don’t know can kill your business
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To give you a jump start, here are five business credit tips for 2014:
1. Know where you stand.
You can’t improve your credit health if you don’t know where it stands. Take the time to access your reports, see how your business ranks, and make sure there are no errors. Don’t take that last point for granted–according to a survey by the Wall Street Journal, 25% of people who checked their business credit report found errors that put them in a riskier category. Regularly monitoring your credit profile is crucial.
2. Set goals and let others know.
After you figure out where your business credit stands, you can make a plan to help improve it. I suggest making a schedule and setting reminders in your phone or on your computer’s calendar to help you stay on track. You’ll also want to let others know about your goals. The more people you tell about your plans to boost your credit health, the more likely your are to stay accountable.
Making a plan sounds great, you say, but what should be in it? Glad you asked. First and foremost you should plan to…
3. Pay your debts on time.
One of the most important things a business can do to improve its credit score is to pay all of its debts within terms. Credit bureaus will looks at your accounts and gauge how far beyond terms your payments are typically made. The Dun & Bradstreet Paydex score is based 100% on the promptness of your business’s payment to your creditors! Consistently pay on time and your credit scores will thank you.
4. Establish strong credit history.
If you don’t have a credit history, you should establish one so that when you need it, you’ll have already shown your business can be trusted. Trust me, taking a wait-and-see approach is a recipe for disaster. You can start by building credit history with a supplier you work with often. It can even be as simple as office supplies–anything to show that you can properly manage credit.
5. Keep your credit utilization low.
This is the ratio of your business’s current debt to its annual revenue. Again, having access to credit (supplier trade lines, bank or credit union lines of credit, business credit cards, etc.) isn’t a bad thing. But you should keep this ratio low. It can account for as much as 15% of your business credit score.
Here’s to healthier credit and a stronger business in 2014!
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