In the past couple of decade or so, the idea of entrepreneurship and the extensive reach of the internet have given rise to the concept of e-commerce. Entrepreneurship is the answer to unemployment. It not only opens up the doors of limitless opportunities for an entrepreneur, but it also paves for the overall development of the nation.
It is crucial for any new generation entrepreneur to have a sound financial knowledge about the business, whether it’s a startup or a large-scale business.
A number of e-commerce businesses across industries have sprung up in the recent past in developed as well as developing nations. This sudden upsurge of e-commerce businesses has transformed the dynamics of the business world. The key for any entrepreneur is to grasp all the financial aspects of the business thoroughly.
An essential element in this regard is an e-commerce business credit score. A business credit score is a numeric measure of a business’ creditworthiness. Various credit rating agencies are responsible for assessing the credit score based on many parameters such as credit usage, payment patterns, outstanding balances, size of business, etc. A good credit score establishes the credibility of a company in the public eye, making it convenient for the business owners to avail credit.
As an e-commerce start-up founder, your first question should be “I want to fix my credit score, but how?” Let’s have a look at some of the ways to boost up your business credit score.
What you will read in this article:
Keeping the Debts Minimal
Debts are an essential factor that directly affects the credit score and credit utilization of a business. The lower the debts are the better does your credit score gets and lower the credit utilization.
Although for a start-up, it is impossible to avoid loans and credit. In fact, until the break-even point, a start-up survives on debts. However, the liabilities can be managed wisely to prevent any negative impact on the credit score.
Dealing with Businesses with Poor Credit Scores
Business has multiple associations with other companies. There might be other higher-risk businesses that you have to partner with.
If you stay cautious about payment terms and structure the deal wisely, you can save your credit score from being negatively impacted. Make sure to set shorter due dates, ask for an advance payment and penalize them for late or delayed payments.
Also, in this regard, it is advisable to slowly push those businesses out of your cycle that is late payers. If not, then at the least, be cautious about being over-reliant on such companies. Late payments directly paralyze your ability to pay bills on time and hence impact your credit score. Therefore, lower your dependence on such companies.
Provide Your Business with A Unique Identity
This can be made possible with the art called graphic designing. Business designs, especially business logos can be designed in-house that can provide your business with unique and one-of-a-kind identity.
Using technology to your advantage, you can give your business identity an edge that catches attention and stands out from the crowd.
Review Your Credit Score Regularly
First know, what the range of a good credit score is. Do not over-stress for a few points. As long as you are in a decent score zone, you shouldn’t find any obstacle in doing business. Next, keep an eye on your business score.
You have the right, and the credit rating agencies have an obligation to let you know your score. It is possible that they have committed a mistake or some vendor has reported you for events such as invoice disputes. Such cases can be corrected, bringing back your credit score to the average level.
Paying Bills on Time
This is utmost crucial for any credit score. It speaks volumes about a business’ pay-back capacity. First and foremost, setting up an organized and good accounts payable system is a must. That helps in knowing the due dates and due amounts well-in-advance, hence preventing any delayed payments or missing out on due dates.
One can also automate payments by using various accounting software. Keep a note of your cash flow. Cash flows can directly impact your payment capabilities. Also, stay aware of bigger companies. They have automatized systems to take note of every activity. Hence, chances of your delayed payments getting reported to concerned agencies stand quite high.
Be Forthright in Case You Foresee A Delay in Your Payments
There is no shame in running out of money. Every business, big or small faces that. However, it is essential to inform your creditors about the potential delay in your payment, why you would be delaying the payment and around what time can you make the payment. Alerting the creditors beforehand reduces the chances of your creditors reporting the delay to credit agencies.
A credit score is a crucial metric both in a personal and business context. Understanding its importance and acting wisely is the key to managing your creditworthiness.