What credit rating means in B2B
As a B2B company, ongoing credit assessment of your debtors is essential, as an inevitable and essential element of extending credit is the risk of losing outstanding money to weak companies as well as bad payers.
A credit assessment then becomes crucial to catch potential bad debtors and create predictability in the expected losses on your company's receivables.
By conducting ongoing credit assessments of your debtors, your business credit risk is minimised. Because with ongoing credit assessments, losses on debtors can be significantly reduced.
A credit assessment then becomes crucial to catch potential bad debtors and create predictability in the expected losses on your company's receivables.
By conducting ongoing credit assessments of your debtors, your business credit risk is minimised. Because with ongoing credit assessments, losses on debtors can be significantly reduced.
Why are frequent credit assessments important for B2B companies?
The credit assessment is partly an assessment of the risk that a potential debtor will default, but the credit assessment also implicitly expresses the probability that a given debtor will go bankrupt.
By having credit assessments carried out on an ongoing basis, your company always has an up-to-date insight into the debtor's ability to pay and an implicit knowledge of whether the potential debtor is about to go bankrupt or not.
By obtaining frequent credit assessments, the company is thus protected against doing business with business customers who are unable to meet given credit commitments.
Furthermore, an ongoing credit assessment provides an insight into whether a cooperation is healthy or heading in the wrong direction.
As a business, it can be difficult to navigate the different parameters you need to take into account in a credit assessment, but there are a number of things you can take into account in your business.
By having credit assessments carried out on an ongoing basis, your company always has an up-to-date insight into the debtor's ability to pay and an implicit knowledge of whether the potential debtor is about to go bankrupt or not.
By obtaining frequent credit assessments, the company is thus protected against doing business with business customers who are unable to meet given credit commitments.
Furthermore, an ongoing credit assessment provides an insight into whether a cooperation is healthy or heading in the wrong direction.
As a business, it can be difficult to navigate the different parameters you need to take into account in a credit assessment, but there are a number of things you can take into account in your business.
10 things to look out for as a business when performing credit checks
In preparing a credit rating, there are a number of vital issues that should be examined as these can have a significant impact on the rating. We have listed the 10 most important below:
Age of the company
Take a closer look at your company's accounting data
Company structure
Liquidity of the company
Soundness of the enterprise
Profitability of the company
Evolution of the number of employees in the enterprise
Sector/industry-specific conditions
Be aware of multiple platforms
The company's transaction pattern
Get help with your credit rating and focus on your business
There are many issues to watch out for when executing proper credit ratings, which need to be continuously updated so that the rating remains accurate.
A good example of the challenge of continuous assessment is the impact of the Corona crisis on the food industry. A supplier of food to restaurants, which normally has a credit score of 10*, suddenly achieves a credit score of 3, as all restaurants were suddenly closed due to corona. Now you, as a company, have to decide whether to change your credit terms or stop working with us altogether. It is therefore essential to monitor your customers, as their creditworthiness and credit score can change over time.
There are credit rating platforms that provide continuous credit ratings, which are automatically updated. An example of this is the Risika platform, which uses an algorithm that takes into account key figures, industry, bankruptcies and more. This allows you to focus on maintaining and building profitable customer relationships while the credit rating is being done elsewhere.
*10 is the maximum score on a credit report. If a credit score is 7 or above, the company is in the 'Low risk of bankruptcy' category. Read more about Risika's credit scoring here
A good example of the challenge of continuous assessment is the impact of the Corona crisis on the food industry. A supplier of food to restaurants, which normally has a credit score of 10*, suddenly achieves a credit score of 3, as all restaurants were suddenly closed due to corona. Now you, as a company, have to decide whether to change your credit terms or stop working with us altogether. It is therefore essential to monitor your customers, as their creditworthiness and credit score can change over time.
There are credit rating platforms that provide continuous credit ratings, which are automatically updated. An example of this is the Risika platform, which uses an algorithm that takes into account key figures, industry, bankruptcies and more. This allows you to focus on maintaining and building profitable customer relationships while the credit rating is being done elsewhere.
*10 is the maximum score on a credit report. If a credit score is 7 or above, the company is in the 'Low risk of bankruptcy' category. Read more about Risika's credit scoring here
Minimise your financial risk
If you have questions about credit ratings or want help finding a company's credit score, jump in and try the Risika platform!
