How Business Credit Reporting Companies Help Organizations Manage Risk

by Kristen White Blogger

Having access to a vendor’s credit rating and history provides transparency into how stable the company and provides a snapshot of its financial health. Business credit reporting companies provide companies with access to financial profiles of prospective business partners so they can identify potential risks.

If you do not know a supplier's current credit score, financial history and credit risk score you cannot determine whether it is a good idea to do business with the vendor, and not knowing could lead to less-than-desirable results. For instance, you could submit payment for a product that is never delivered. If the product in question is a component or raw material in products you produce, it could cause production and delivery delays and ultimately have dissatisfied customers.

The desire to avoid problems like this is one of many reasons why businesses look to business credit reporting companies for help identifying potential problems before signing an agreement with a supplier or partner.

By verifying creditworthiness, business owners can save their organizations from problems such as the following:

Loss of Credibility: If a supplier is late with deliveries or fails to deliver raw materials, a business suffers due to lost credibility with customers.
Financial loss: When a supplier fails to deliver on its promises or customers do not pay, a business could lose a substantial amount of working capital.
Business Closure: A weak link in a supply chain can destroy the ability of a business to operate effectively and force a business to cease operations.

One of the easiest ways for a business to prove creditworthiness is to submit a credit application. A credit application should provide a business’s contact information, taxpayer-identification number, details about principal and business references. All of these provide information that helps organizations determine whether a business has a proven track record of meeting its contractual obligations.

Working with business credit reporting companies that can provide access to reports with this information is an efficient and cost-effective way for a business to make informed decisions before deciding to work with a supplier or vendor.