Procrastination, overspending and nail-biting are common examples of bad habits. Let's face it, everyone has their vices, but some bad habits are so hard to break. Although we're all susceptible to have some bad habits in our personal lives, when it comes to business, it's our customers, employees and bottom line that are subject to them. This can lead to challenges and may result in the loss of business.
Here's a look at five bad habits that small business owners may find themselves battling with that hurt a company's credit ratings.
- Paying Invoices beyond Payment Terms – How a company pays its invoices is one of the main factors impacting business credit ratings. Paying invoices several days or weeks past the due date is a bad habit that not only negatively impacts business credit ratings but also may jeopardize the credit terms offered by the vendor.
- Being Reckless with Company Data – The information a business owner furnishes on credit applications, company documents and other financial sources is critical data that makes up a company profile with the business credit reporting agencies. Providing inaccurate or outdated information will directly impact a company's ability to obtain credit with businesses, suppliers, and lenders.
- Overextending the Company's Credit Limits – Using credit that is larger than what is available to the business is a practice that should be avoided at all costs. This could result in over-the-limit fees, a decrease in credit limits and may result in your account being closed by the issuer. Charging more than your limit also hurts your company's credit ratings because it is a strong indicator of poor business credit management.
- Ignoring Cash Flow Management – Statistics show that upward of 50% of businesses fails due to lack of proper cash flow management. Cash flow is the lifeblood of a business and it impacts how a business meets its financial obligations such as meeting payroll or paying a supplier. Failing to pay suppliers on time will ultimately result in hurting your company's credit history and ratings.
- Refusing to Acknowledge the Importance of a Web Presence – When it comes to business, the internet is constantly growing and evolving with new technologies, platforms and applications that are streamlining the lending process. Failing to realize the need for a company website and presence on the web can be costly. Did you know a company web site is one of the ways a creditor will review and learn more about a business? Some creditors may even consider it a greater risk if a business does not have an internet presence.
A company's credit ratings play an essential role in the credit review process. It shows lenders, suppliers, banks, etc. how you handle your financial obligations. While bad habits are hard to break, put together a simple and workable plan that you can implement as it will help you make great strides in the success of your business.
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