Why Small Business Owners Don’t Use Credit Reports But Should

Originally published in The CEO Magazine  by Matthew Debbage

Getting paid on time is a cornerstone of success for all companies, regardless of size. However, maintaining a healthy cash flow is especially important for small businesses; just a handful of late or missed payments can be devastating. Unfortunately, small businesses are overlooking a simple risk management tool that can help mitigate or avoid this issue altogether: credit reports.

Small Business

A basic business credit report helps small business owners identify a potential non-paying customer before entering into a business relationship by providing valuable insight into a company’s payment history, credit worthiness and financial health. Each report includes important information on a prospective client, including how quickly the company pays its bills, how much credit it should be extended and if there are any legal proceedings against the company.

Despite the myriad benefits of a credit report, a lot of small business owners don’t use this financial tool as a part of their risk management strategy. In fact, we’ve found that a lot of companies that use credit reports – many of them small businesses – are first time users.

Here are 3 common misconceptions about credit reports that way too many small business owners believe. 

Chapter 1

Credit reports are too expensive

While purchasing a credit report is a cost center, a string of non-paying customers can be even more costly. Subscription-based credit reporting services offer an affordable way for small businesses to benefit from ongoing access to credit reports versus paying for individual reports.

Chapter 1

They don’t offer that much useful information

It’s a myth that credit reports only provide topline information, like a credit score or debt profile. Well beyond the credit score, small business owners can glean a lot of valuable insight from a credit report, such as who is running the company, how much outstanding debt the company holds, whether or not there are any legal judgments or tax liens. Credit reports are also surprisingly easy to use and certainly not reserved only for a financial or credit expert.

Chapter 1

It’s just not a tool small businesses think to use

Many small business owners just never thought about using a credit report, perhaps because they are too busy running their company or think that their business isn’t large enough to reap the benefits. But, in reality, credit reports are an extremely effective and valuable tool for any size business – not just for large corporations.  

The most important thing that a small business can do to protect itself is to make sure that its customers are who they say they are and that they will pay their bills.

The most important thing that a small business can do to protect itself is to make sure that its customers are who they say they are and that they will pay their bills. Once small business owners discover the benefits of using a credit report, they will quickly realize that it’s one of the most practical and beneficial tools in their arsenal.

About the Author

Matthew Debbage

Matthew Debbage is the COO of Creditsafe Group and the CEO of Creditsafe USA. He has been responsible for Creditsafe’s international expansion across Europe, Asia, and the U.S.

Matthew has been building a career in business intelligence and business credit management solutions for more than a decade and has developed global expertise along the way.