What’s the point of a business credit score anyway?

In your own personal life you probably know why your credit score makes a difference. You need to get a mortgage to buy that house you need because you’re in that place in your life when settling down seems the thing you’re supposed to do.  You want to get a credit card so that you can take advantage of some last minute holiday deal to a sunshine resort but don’t have the funds to pay for it now.

 

You know that when you apply for these things your credit score is going to be looked at by the banks or the credit card companies to see whether you’re worth them risking their money on you.  Are you going to pay them back?  Are you going to pay them back regularly, and on time?

 

Without a good credit score, you probably know that your chances of getting the card, or the loan, or the mortgage, are reduced.  Or you won’t get quite as much as you hoped for.  You might get a £3,000 credit limit as opposed to a £5,000.  Or a 6 months interest-free period as opposed to 12 months.  You might be advised to provide 25% of the value of the property as opposed to 15%.

 

All because your credit score doesn’t show the financial institutions that you’re a good CreditScore100risk for them.

 

Well, it’s exactly the same for businesses when they need to get their hands on a new source of funding.

 

The financiers will take a look at the credit score of the business to see whether their money is going to be safe, but whilst we’re aware of this in our private lives, small businesses often pay no attention to it in their business life.

 

A Department for Business Innovation & Skills report into how small businesses try to raise external financing found that 69% of UK businesses had NEVER checked their credit score, despite the fact that 56% of SMEs have required external financing during the previous three years in order to operate their business.

 

CreditScoreAnd what happens when you need to get external financing?  Your credit score gets checked.  That’s a whole host of businesses going into financial negotiations completely blind as to their chances of success.

 

You need a loan to extend your premises or buy that new van.  You contact a source of external finance and the first thing they’ll do is check how big a risk you are to them, and they’ll find out your credit score before you do!

 

How is it possible to plan your business if you have no idea what finance your likely to get given your credit score and visible financial record?  The reality is that most businesses don’t plan this kind of thing.

 

The average time between a business enquiring about external finance and actually needing to use the finance is just 8 days.  That’s not a lot of time to adjust your plans if you’re unsuccessful in getting all the finance you need, or the finance you do get is more costly than you expect, both of which might happen if your business’s credit score isn’t in good shape.

 

That’s why you should be monitoring your credit score from the day you start trading, because at some point in the future you’re likely to need it, and by that time it needs to be as good as it can be and there’s no time to take any steps to improve it if it isn’t.

 

Start putting some positive effort into your business credit score today so that when the time comes you’re ready.  Check your score regularly, ensure the details are correct, pay your bills on time, file your accounts on time, don’t go overdrawn, and don’t default on any debts.  You’ll then have a much greater chance of being able to finance the business on your terms.

 

What’s your business’s credit score?

Late payment threatens to derail the freelance industry

UK freelancers are increasingly struggling with late invoice payments, with around half admitting they have considered quitting life as a freelancer because of worries over continued late payment, and 46% stressing about having enough cash to live on.

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Our latest research here at Ormsby Street, also reveals that one in ten freelancers have faced difficulties paying their mortgage or rent because of late invoice payment, and many have turned to family (37%) or even payday loans companies (36%) to cover a shortfall brought about by late payment.

While a fortunate 19% of respondents say most of their invoices are always paid on time, a freelancer’s invoices are paid on average 18 and a half days after their due date. At any one time, a freelancer in the UK is owed on average £5,431.03 in late payments and 79% of freelancers say that cash-flow is the number one concern for their business.

“Every freelancer knows that late invoice payment is one of the biggest frustrations, impacting cash-flow and causing much stress, from paying the mortgage to having enough money to live on,” said Martin Campbell, Managing Director, Ormsby Street. “For a freelancer to be owed more than £5,000 is clearly unacceptable and threatens the emerging freelance economy in the UK, which brings flexibility and work / life balance to so many.” 

The Office for National Statistics revealed in 2015 that 4.55 million Britons are now their own boss and research by the Association of Independent Professionals and the Self-Employed (IPSE) found three in five businesses agree that it would be difficult to operate without hiring freelancers. The Ormsby Street survey of 1,002 freelancers and sole-traders, revealed that 40% of respondents have taken out a County Court Judgement (CCJ) in the last year to chase a bad debt, and more than half say that late invoice payment is getting worse not better.

It remains a problem for many freelancers when it comes to chasing clients over late payment, partly because they do not have the time to spare, but also because of fears this might impact future work with that company.  57% of respondents say they worry that if they chase for payment that client might not use their services again, while two-thirds say they feel uncomfortable and awkward chasing clients for late payment.

“Why should a freelancer waste their own billable hours chasing payment for work that has been successfully completed and is already due for payment,” continued Martin Campbell. “If customers are not willing to pay within the agreed terms then it’s time for freelancers to become more informed over whom they work with, and either ask for payment upfront or even choose to not work with company.”

Special Freelancer rate!

With 49% of freelancers having had to turn down a contract because of concerns over a client’s ability / willingness to pay on time, we’re offering access to CreditHQ for the special freelancer rate of £12.50 for the standard subscription; allowing freelancers to obtain financial insight into every company they trade with. Sign up here to take advantage of this offer

“Freelancing has grown in popularity because of the choice and flexibility it gives people over their career, but its success relies on the prompt payment of invoices, which is not happening enough,” concluded Martin Campbell. “Credit-checking potential customers and partners is straightforward to do and should be done by a freelancer every time they work with someone, to protect themselves against late payment.”

About the research

An online survey of 1,003 freelancers and sole-traders was undertaken by TLF Research in March and April 2016.

CreditHQ, the credit-checking tool built by Ormsby Street, collates credit and trade information from Companies House, Experian and Dun & Bradstreet and presents that information in simple-to-understand credit and payment indicators, so a freelancer can assess which businesses are likely to pay them on time, or after 30 or more days.

Formed in 2014 to take over the operation of the financial data proposition of BCSG, Ormsby Street is developing the next generation of financial data services for small businesses. Its team of high-performing product innovators and software engineers are quietly taking sophisticated financial information and turning it into a next-generation digital tool to help businesses make good decisions about customers, suppliers and themselves.

Which football club’s finances need a kick-start?

Swansea and Southampton top premier league of invoice payment!

As this year’s football season reaches an end, here at CreditHQ we thought we’d take a look at how good the top football clubs are at performing where it matters – in the payments department!

Small businesses wait on average, 72 days for payment of invoices, and our analysis last year showed the average overdue invoice to a small business was worth a whopping £6,142. 

The Payment Premier League was compiled by combining figures for payment performance and credit risk.

“If a small business wins a contract with their local football team then it is easy to let the heart rule the head, and just go ahead with the work regardless – people love the idea of working for the team they support,” said Martin Campbell. “But our analysis shows that just because a team is good on the pitch, it doesn’t necessarily follow that they will be as strong when it comes to paying invoices on time.”

“Winning a major contract with any sizeable local company is a big deal for a small business, but few would think to run a credit check. Yet the average time for a small business to be paid is 72 days, a period of time which could be seriously problematic for a small business, if the figures involved were big enough.”

Premier Payment league infographic

Sunderland and Crystal Palace were the worst performers on our payment premier league, so if you’re thinking of doing business with either of these teams, follow these simple tips to ensure you’re taking the right precautions to ensure you stay on top of your business cash-flow:

  • Stay on top of your invoice process to get invoices out on time.
  • Follow up before the invoices are due.
  • Chase invoices when due and always charge interest on overdue invoices (or issue a letter of intent).
  • Review payment terms for this company, including payment up front if you are really worried about the impact of late payment.
  • For major concerns about a customer’s financial health, don’t be afraid to walk away from a deal.

Check out who you’re doing business with at www.credithq.co.uk

Ormsby Street to demo CreditHQ at Finovate Spring

We’re heading off to San Jose next week, as we’ve been selected to present CreditHQ at the prestigious Finovate Spring event in San Jose.

Finovate Spring is a demo-based conference for innovative startups and established companies in the fields of banking and financial technology. Held in San Jose, California, the event offers an insight-packed glimpse into the future of money via a fast-paced, intimate, and unique format.

 

Finovate Spring

FinovateSpring is a conference on steroids and a great opportunity to see new technologies and upcoming companies changing the world of financial technology.  Victor Smilgys, Keypoint CU

Competition is fierce to appear at this event, with around 70 companies from the financial technology sector showcasing new products or technology over the course of two days – both on stage and on their company stands to an audience of over 1500; including investors, VCs, entrepreneurs, expert analysts and influential press.

Our CEO and co-founder, Martin Campbell, will be presenting some great new features of CreditHQ, including our new bookkeeping integration. Of the integration, Martin said:

When connected to Xero, CreditHQ, like a good financial controller, monitors every customer and every invoice the company has.  Unlike a financial controller, it has access to real-time credit scoring and payment performance information from multiple sources as well as insight into thousands of other small businesses using the product to chase invoices and recover debts.

Combining these data sources and feedback from tens of thousands of users using a patent-pending data-driven approach, the next generation Insight Engine is able to identify cash flow problems and credit risks for your business and highlight the most effective way to resolve them, and present a prioritized action plan to the business leader who can then simply approve the actions that the insight engine has planned.  

As well as highlighting actions for our own customers, our bank partners who provide the product to their SME customers, also gain insight to help them target the right products and support at small businesses customers they historically have very little data about.”

If you’re heading to Finovate, please come and say hi and let us show you how CreditHQ can help all small businesses combat the problem of late payments and focus on growth and success. For 20% off your ticket(s), use code: OrmsbyStreetCompFS16

 

 

We’re a Benzinga Finalist!

Ormsby Street has been chosen as a finalist for this year’s Benzinga Awards – in the ‘leveling the playing field’ category

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The Benzinga Awards (BZ), is a competition to showcase the companies with the most impressive technology, who are paving the future in financial services and capital markets.

Last year’s winners include HedgecoVest who were the overall winner, with Estimize taking first place for best startup.

If you’d like to join in the celebrations in New York on May 24th, click here for full information and details of how to grab your ticket.

Good luck to all the other finalists!

We’re off to the States with CreditHQ

Next week, we’ll be heading to Minneapolis (home of the late, great, Prince), for the Barlow Research Banking Conference.

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The conference brings together the world’s leading banks and fintech companies, focusing on the new trends that are changing the face of banking and small business. Our M.D. Martin, will be taking to the stage on Monday 2 May at 5pm to demonstrate how CreditHQ can help provide banks across the world with insights and support for their small business customers. Tuesday sees the unveiling of the Monarch Innovation Awards – so head along at 10.45am to check out which companies have been chosen as the most innovative in fintech this year.

We’ll then be heading off to San Jose, California to Finovate Spring; so watch this space and see what we’ll be releasing in the latest version of CreditHQ!