Paying your bills on time is quite possibly the most important part of good credit. As with your personal score, your business credit rating uses this to determine your financial reliability.
When you run a business, those expenses can pile up fast. You may have the money to pay them, but if you miss a due date, you’ll be hit with late fees and a credit score reduction.
The best way to prevent this from happening, and to make things easier on you, is to automate everything you can. Talk to your creditors and check to see if they offer incentives for automated payments. Some businesses provide a discount to companies who set up automatic withdrawals.
Many small and medium business owners are concerned about setting up automatic payments. They rely on clients to pay their invoices on time. This can be erratic, with some months making a profit and others barely scraping by.
Automating your invoice collection process solves this problem. Now gives a great overview of some clever ways to put invoice collection on autopilot here.
The small flat fee charged by the invoicing company pays for itself. When you know what's coming in, you can prevent late fees and keep good business credit. You don’t have the hassle of uncertain collections, and you can choose which invoices to submit to the company and which ones to handle yourself.
Some financial experts recommend never using a credit card. However, if you can handle the responsibility, this is a great way to keep your business credit in good standing.
Part of your business’s score is the utilization of available credit. If you’re overusing your spending, it's a red flag to potential lenders who may think your business is having financial difficulties.
On the other hand, not having any open credit means this score is low by default. You can’t have low utilization if you don’t have any credit to borrow from. That’s when a business credit card comes in handy.
Use your card for small daily expenses, such as fuel and travel. As long as you keep the balance low, you should be able to pay it off each month. This revolving credit shows you know how to handle your finances.
Look for credit cards that reward you with relevant perks, too. Some companies offer cash-back incentives or fuel perks. Others give you frequent flyer miles, but if you don’t travel often, this isn’t a card that would be a good fit for your business.
With so many credit card companies offering incentives, find one or two that have perks that will save you money. Then use these cards for your daily expenses and pay them off each month.
Having good business credit will come in handy as you continue to grow your company. It’s part of your overall reputation, and not having to worry about getting approved by a supplier or lender is priceless.
With these tips, you’ll be able to keep your business’s credit rating in good standing. Since you won't have to worry about your score, you can focus on your future financial goals!