Monitoring Company Credit
The are enough things to do in running a business, the last thing you want is for anyone to add something to that list. I get that, however monitoring your company’s credit is important as things happen without your knowledge that can come back to bite you.
Let me give you a couple of numbers then tell you how they often come about, and come back to haunt you.
The last report on the number of county court judgements (CCJs) raised against UK businesses was in mid 2016, the report continued to show some trends which are reported as encouraging, but I see it a little differently.
2016 was the seventh year in a row in which the average value of a CCJ filed against a business fell. This time the average CCJ amount fell a further 17% to £1793. In theory there is less debt being unpaid and less large debts left outstanding. In theory.
The Issues For The SME
The fall in the average value of a CCJ is likely driven by several factors;
- The rise in debt management companies who are instigating CCJs at a lower level
- More streamlined processes for businesses to file CCJs for non payment
- Apps and connected cloud systems are chasing unpaid invoices automatically, creating an audit process leading to a CCJ
The reasons are fairly sound. The part that catches many small businesses out is that too often they are not aware that a CCJ has been filed or even applied for. Unlike personal borrowing there are more complexities with the SME.
Let me expand.
The SME Challenge
The reason why so many SMEs see CCJs filed against them, yet be wholly unaware that it has happened, can be down to a number of factors. These are a few;
- Multiple offices. Where a claim is sent to a subsidiary office, not recognised or not actioned
- Claim sent to a registered address with post not collected, common where the registered address is a serviced office
- Shared post boxes or post trays in offices where letters are misfiled
- A demand sent to a wrong address totally
- Sent to an old address when your business has since moved. Old addresses tend to hang around on directories and websites
Often a CCJ can be filed where there is little justification for it. The fact that you never contested it (because you were not aware) is neither here nor there.
The first time many businesses become aware is when applying for finance, by which time it can be a case of closing the stable door and a bolted horse.
There are plenty of systems out there that can monitor your credit for you, similar to the way personal credit profile services work. Many SMEs could well benefit from not only monitoring their credit but also that of their debtors. For a few hundred pounds a year it can be well worth the money.
It is far easier to address and resolve a CCJ that has recently been filed than it is to remove a historic entry.
A few changes now could save you a world of pain later.
By Dave Farmer
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