How bad is your company's credit? You may not think about it much, but you can bet your suppliers do. A bad credit rating can damage your company is several ways:
- Loss of eligibility for commercial credit. Bank loans are out of the question if you run afoul of your responsibilities.
- Having to pay cash for everything. Paying in cash ties up your working capital and impacts your cash flow. You'll lose access to the 30-day, 60-day and even 90-day "loans" that trade-credit customers enjoy.
- Loss of "early payment" discounts. Many suppliers offer customers significant discounts to encourage payment before the official due date on their bills. If you're a cash customer because of credit problems, you're unlikely to get this discount.
To find out where you stand, order a credit report. See what it says about your company's state of financial affairs. It's a good idea to do this periodically to make sure the information is correct and current.