A recent newsletter from the Institute of Credit Management (ICM) got me thinking about the importance of negotiating good payment terms with our suppliers.
When suppliers grant credit, it eases cash flow, something that is essential for all businesses. It also means that we can in turn extend credit to our customers and that can help to clinch a sale.
When you ask a supplier for credit, they need to have confidence that they will be paid and for that reason, it is essential to have a good credit rating. So how do you ensure that your business’s credit rating is as good as it can be?
- Prepare and file your accounts carefully and on time.
- Pay your bills on time, every time.
- Avoid “red flags” – CCJs and other disputes will stand against you, even if you win.
- Talk to your suppliers. Having an open, cooperative relationship will make them more likely to offer credit.
- Talk to the credit reference agencies and find out how they score businesses. Each agency uses different criteria, so talk to several and fix any problems that may have a negative impact on your credit score.
I’ll leave you with the words of the ICM:
“Credit is an essential business tool, but the granting of credit is not a given right.”