Do freelancers check their credit rating regularly?

The information services company surveyed 700 UK SMEs and discovered that 71% do not carry out credit checks on their customers, exposing them to a higher risk of late payment or not receiving payment at all. The research also found that 39% of small firms and contractors do not even know what a credit score is and 61% have never found out the score for their own business.

Experian pointed out that businesses that neglect to check their own score will not be aware of any adverse issues until they are refused a contract, supplies or are unable to obtain finance. And yet small businesses may score low because of a lack of detailed information about the firm rather than financial insecurity.

Low credit ratings can affect a company's ability to obtain finance and suppliers could enforce stricter trading arrangements. Because SMEs generally rely on a small pool of customers and suppliers, the loss of one trading partner could seriously impact the firm's financial health.

Simon Streat, the MD of SME business at Experian UK, said that whilst two thirds of the country's SMEs are blind when it comes to their own credit score, financial institutions and larger trading partners will not be. SMEs are putting themselves at a big disadvantage by not addressing credit problems. Businesses should monitor their credit score regularly and take immediate action if any issues are highlighted.

Despite the fact that small businesses are green when it comes to credit awareness, the sector is showing signs of growth.

Invoice financier, Venture Finance, says small business turnover has increased by 16.2% over the last 18 months. Small businesses now have an average of 25.6 customers which is almost the same as they had before the recession kicked in and the engineering and manufacturing sectors have shown strong turnover growth at 19.1% and 32% respectively during the period.

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