March is Credit Education Month!

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March is Credit Education Month – so is it time for a money makeover?

Credit Education Month was created to remind consumers and companies alike of the importance of good financial management. Whilst it can seem a little daunting to go through all your incomings and outgoings, it’s incredibly beneficial and could save you significant amounts of cash. For personal finances, there are lots of great online resources to point you in the right direction, such as Money Saving Expert and MoneyWise

For organisations, however, it can be slightly more complex but equally important, because if you’re seeking business borrowing, the first thing any lender will do is to check your credit rating on one of the major reference agencies such as CreditSafe, MINT, Experian, etc, and so you’ll need to present your proposition in the most positive light.

Here are our top tips to improve your the financial health of your venture and ensure you’re fit for business borrowing in the eyes of the banks:

Ensure your balance sheet is well structured – in other words, making sure assets and liabilities are classed correctly. As an example, reclassifying Directors loans to the company as long term liabilities rather than short term liabilities improves net current assets

Collect the cash – towards the end of financial year end, try to collect as much cash as possible so that the balance sheet is strong. You may wish to temporarily offer discounted payment terms to get invoices (although not too much discount as that impacts profitability)

File your accounts on time – late filing at Companies House will certainly get you a black mark, and making the same mistake at HMRC will incur penalties

Pay your suppliers on time – take advantage of the terms they offer, but not a day more unless by prior arrangement, as lenders – and indeed other suppliers – may ask for trade references from organisations with whom you have a trading history.

Check for errors – even a simple mistake such as an incorrect address can affect your credit history. If you believe that there are errors in your report, you can dispute these with the credit agency but will probably need to provide documentary evidence of your claim.

Show you can pay your debts as they fall due – positive net current assets e.g. having more trade debtors than trade creditors will demonstrate this

Check your fellow Directors ratings – if any Director has a CCJ or IVA, then that will seriously affect the rating; likewise of course if the company itself has any CCJs (unless you paid the amount in full within 28 days of the claim being made, then the judgment will have been cancelled and this shouldn’t appear on your record)

Have your accounts to hand – if your company is not incorporated, a lender will most likely ask you directly for the last 2 -3 years sets of accounts. Having these readily available will avoid delays in any funding applications.

For more advice on improving business or personal credit ratings, contact the office for an appointment on 02920 713 800.