Keeping Up Your Credit Rating

Just as you need to keep an eye on your customers' credit rating, your suppliers are likely to be doing the same for you. If your credit score slips below 80, red lights will start flashing. Interest rates might go up, the bank will start to ask questions, lenders might call in their loans, suppliers may withdraw credit. The life of your business will get a lot more difficult.

What Affects the Business Credit Rating?

You are probably aware that you need to make payments on time and keep on the right side of the law and regulation. You may not realise that the rating agencies also consider the age of your organisation, its structure and the sector in which you operate. If the sector has been badly hit by the recession, no matter if you are still trading strongly, you will be tarred with the same brush.

The sole trader is not looked on favourably, nor is a company with only one director. If something happens to that single person, the business is likely to fold. Similarly, if you have more than one director but one of them has been associated with a failed enterprise in the past, the business is likely to be marked down.

Do the Corporate Rating Agencies Make Mistakes?

This may not happen often, but it is always a possibility. If you provide a service to a struggling business sector, you might be listed within that sector and down-rated accordingly, whether or not you have other, healthier customers, or have diversified to meet the prevailing market conditions.

What Should you Do?

Check your credit report and status regularly. Try to form a working relationship with the agency, so that as your financial circumstances change, you can explain your reasons for taking certain actions. Discuss credit rating issues with your outsourced bookkeepers, and together you can keep your credit rating as high as possible.

Don't be Just a Workaholic

When you are working for yourself, or helping to start or build up a business, it's often hard to stop working. Many small business owners work all day and late into the night. Whilst that might be necessary for a while, it's dangerous to continue the practice for too long.

What are the Dangers?

The danger can take a number of forms. Not taking time out with your family can cause resentment, marital strife and in extreme cases, even divorce. Children feel unloved and can grow up with personality disorders and get into all sorts of trouble.

Obviously all work and no play will not be good for your health. You must take time for yourself to switch off and recharge your batteries.

In the long term, it's not good for your organisation either. A weary manager can make serious mistakes, missing vital factors that should influence decisions, and a series of wrong decisions will have the business floundering.

Get the Help you Need

If you think you've been working too hard for too long, you need to do something about it right away. Look at your staff and see who could help by talking some of the load. You may have to recruit if you don't find someone in-house. Learning to delegate is one of the hardest things for a business owner to do, but it will be essential before long if the business is to develop. Don't leave it too late.

Don't have any staff? If you are a sole trader who doesn't want to become an employer, you could always use agency staff on a temporary basis. A temp could catch up with a backlog of mundane admin work, leaving you free for the important operations. You could even find yourself a virtual PA.

Outsourcing your bookkeeping might also be a first step to getting a better balance between your work and your life. If you already do this, why not ask your bookkeepers what other services they offer that might help?

Adequate and Accurate Accounting Records

HMRC has recently announced that it will be checking the accounts records of 50,000 businesses in each of the next three years, to see if the records are adequate and accurate. You could be one of those businesses. The penalties for any non-compliance they find can be up to £3,000, and there may be extra tax to pay, so you are advised to have everything in order before they come calling.

Records Can Help Your Business

This is not the only reason to make sure your ongoing accounting records are up to scratch. They are crucial for any entrepreneur to keep a handle on business affairs and financial control. Being able to know exactly how much cash has been paid in and spent means you know just how much is in the bank, and what you have to play with when making plans. It can keep you out of the red or within your arranged overdraft, so you can avoid associated hefty bank charges.

Equally important is being able to look back over your income and expenditure month by month, quarter by quarter, year by year. This helps you to identify patterns, opportunities and problems. When you know about the opportunities, you can work out how to exploit them. When you know about regular problems that are coming up, it could be easy to work out how to avoid them.

Getting Help from Bookkeepers

If you employ a bookkeeper and don't qualify for a full annual audit, you might want to have someone independent come in and check that everything is in order, show you how to identify the highs and lows and what they mean. If you use an outsourced bookkeeping service, why not schedule regular quarterly meetings to discuss the peaks and troughs, where the opportunities might lie, and what can be done about the problems, if any. Your external bookkeeping service may well have observed similar problems with other clients, and be able to use this experience to advise you.