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How to Mitigate Business Credit Risk with Business Credit Reports

Ann Marie Smith

9/6/2021

Extending credit to customers is not only common, but necessary for most companies. However, every time you extend credit to a customer, you are taking a risk.

A big part of your job, whether you are a small business owner or an executive at a large enterprise, is managing risk — especially preventable ones. While you may not be able to prevent exposure from outside forces or control what your competitors do, you can mitigate the risks you take that are within your control.

Business credit reports help you make smarter decisions about extending credit to customers and doing business with suppliers. Command Credit can help you find the right business credit reports you need to manage your risk and protect your business.

Mitigating Business Risk

Effective risk mitigation in business employs five specific strategies. These strategies apply whether you are trying to decide on a project, doing business with a supplier, or extending credit to a customer.

  1. Assume and accept
  2. Avoid
  3. Control
  4. Transfer
  5. Monitor

Assume and Accept Risk

Businesses need to identify the possible risks associated with any project or business venture. By analyzing risk, you must decide whether the consequences of any risk you identify are acceptable.

Doing business with a company heading into bankruptcy or extending credit to an organization that has a deteriorating financial position are significant risks. A business credit report can identify adverse situations or warning signs to help you decide if you want to accept the risk.

Avoiding Risk

If you know there is a likelihood that a customer may go out of business or fail to pay their bills on time, it helps you avoid taking on additional risks that could impact your business. You might decline to offer credit or require cash in advance

A business credit report reveals the data you need to make informed decisions.

Controlling Risk

When you identify risk, you can take proactive steps to control it. For customers, this might mean:

  • Provide lower credit limits
  • Asking for a deposit or cash upfront
  • Require partial payments or progress payments
  • Require a personal guarantee

You may also want to charge a higher interest rate for late payments to compensate you for the increased risk.

Transference of Risk

Another strategy businesses use to mitigate risk is to transfer the risk to a third party. For customers, that may mean requiring a credit card on file to pay for debts as you provide products or services.

A credit card allows you to get paid immediately while transferring the risk to the card provider.

Monitoring Risk The final strategy for mitigating risk is one of the most important ones: monitoring risk. In business, things can change quickly. Customers you have done business with for years may suddenly find themselves struggling financially. Suppliers that have always delivered on time may now lack the resources to buy the materials they need to create the goods you need to maintain your cash flow.

During the past year, business closures reached historic levels. In an average year, 600,000 businesses permanently close. In 2020, the Federal Reserve estimates more than 800,000 businesses shut down permanently. Between March 2020 and February 2021, closures were more than 100,000 above historical recorded norms.

A business credit report can alert you to the warning signs of potential financial problems long before a business goes delinquent, shuts its doors, or declares bankruptcy. Monitoring risk is crucial to mitigating it.

Trust Command Credit Business Credit Reports

When you buy business credit reports at Command Credit, you can choose reports from multiple business credit reporting agencies, including Experian, Equifax, Dun & Bradstreet, TransUnion, and Credit Reports World.

You can sign up for a business credit report service that will provide you with constant monitoring of your credit portfolio, the ability to track a business continuously, or allow you to check the business credit for up to 30 business every month.

You can also choose to pull a self-serve business credit report on-demand at any time.

Because Command Credit does a significant volume of business with each of the business credit reporting agencies, we are the lowest cost provider you will find. We have pricing plans to match your volume and value-added services that guarantee an ROI.

If you are not checking the credit of your business partners, customers, or suppliers, you are taking a bigger risk than you need. Business credit reports can give you the peace of mind that you’ll get paid on time and keep cash flowing.

Contact Command Credit today and let us help lower your business credit risk.