Why you need more than a credit check when doing business

It’s a terrible feeling when you’ve worked hard to line up a new business relationship with a company but later discover that they’ve let you down. It could be that they’re behind on paying that crucial first invoice. Maybe their deliveries are unreliable. Or, perhaps they’re not repaying a loan or credit extended according to the agreed schedule. Whatever the reason, it can end up having an impact on your own business, your ability to keep customers happy and meet your own financial obligations. This is why companies large and small run business credit checks whenever setting up a new account.

The UK doesn’t have a standard credit score for each company like they do in the United States. Instead, a variety of services are available that will supply you with financial information and recommendations about a firm’s creditworthiness. Business credit check services all have a slightly different offering but in nearly every case you’ll get some useful nuggets of information.

What credit check services offer

To begin with, you should receive core details about the company you hope to do business with, which you’ll be able to compare to what you already know about them – its name, address, age, sector and a list of its directors. The service you’ve contacted will usually recommend the maximum level of credit you should extend to your potential new partner, and it might be able to illustrate how much the company you hope to work with is paying other creditors and suppliers each month. There should also be a credit risk score, and an indicator of how likely the company is to go out of business in the next 12 months.

The recommendations and information you receive vary from service to service. That’s because each one uses slightly different sets of data, and each has its own way of arriving at a credit rating when evaluating a business. This is further complicated by the fact that the data available to the risk assessor may be incomplete or not quite up to date.

The limitations of company credit checks

Financial records for companies less than a year old won’t have been logged with Companies House, which makes it hard to calculate a rating. When the company you want to find out about has been established for a while, your credit rating service may provide a financial performance comparison for the last five or six years. Some credit rating services have access to ledger data for a wide range of companies out there, and if they do will be able to tell you how much a given company pays out each month and whether they generally pay creditors and debtors on time or not. But again, sometimes this information just isn’t available.

The long and short of it is that if you want to avoid the scenarios mentioned at the beginning of this article, a business credit check probably won’t be enough. A service like Qynn, which aims to provide customers with a holistic view of who you’re working with, is often useful to have in addition to or instead of a credit rating service.

An aid for business intelligence

Your potential new supplier or purchaser could be an old company with bumpy track record, but with Qynn you might soon discover that it’s under new ownership and has revitalised its potential. It’s easy to find this out because Qynn can quickly show you who the directors and shareholders are, which companies they’re currently associated with, and which ones they’ve worked with in the past. Sometimes this information goes back decades.

For accountants in big firms, who regularly carry out know your customer (KYC) and anti-money laundering (AML) research, Qynn is an indispensable aid for business intelligence. While it doesn’t give credit ratings or suggest how much credit you should extend to a supplier or borrower, it does give every company and every company director a Qynn Score. This is calculated using advanced machine intelligence using all available data, and is a good indicator of company solvency based on current and past performance.

Analyse company financial data

A whole range of financial information is available for over five million companies, including their balance sheets, profit and loss, amounts owed to debtors and creditors, cash in the bank, and more. This data can be visualised over time to track on-going performance, but Qynn also gives you the bigger picture. You can compare one supplier with others in the sector, or compare businesses within a locality, which gives greater context when making a business decision.

That just isn’t possible with a business credit rating service, nor is the ability to visualise extensive networks of businesses linked by directors and shareholders. From customisable spider charts that connect businesses via persons of significant control through to hierarchical dependency charts and animated graphs that demonstrate changes in performance over time, Qynn makes it easier to understand who you’re dealing with.

Looking at chains of ownership and the relationships your customer, supplier or borrower has with other firms could lead to a pleasant surprise. You might find that they’re backed by someone you’ve worked with before, who always settles their debts. Equally, you can mitigate the risk if you discover that one of the co-owners of a parent company is someone who left you in the lurch a couple of years back with unpaid bills and write-offs. Identifying this risk early on might save time and money for your sales and marketing teams as there’s no point courting a company that is likely to fail your due diligence processes.

By creating watchlists, you’ll receive notifications when changes happen within companies in your network. Then, by creating a Clusters diagram, for instance, you can see how all the companies you deal with relate to one another by directors and/or ownership. This might help identify the potential for growth, or help you stem the spread of bad debt within your business network.

Perhaps one of the best things about Qynn is freedom it gives you. Once you’ve subscribed for £9.99 per month, you have unlimited access to all the data and can use it however you like. You don’t need to buy credits each time you want to view data on a company, and you’re free to build your own reports and export them for your colleagues and business partners to digest. Either used in conjunction with a credit check, or on its own, Qynn is a business intelligence you don’t want to be without.