Why You Should Check Business Credit Scores

Your obvious reaction to new business is excitement, because it will bring increased revenues to your company. Let’s face it, having growth in your future is a great feeling of accomplishment. But now is time for “due diligence” on your part. There are two possible scenarios that could negatively impact the value of this new customer.

Late Payments

Late payments, don’t’ be fooled into thinking “as long as I get paid, late payments don’t affect me”, because they do! In transportation around 16% of all invoices are not within terms, that’s $117 billiondollars a year. Late payments for small and medium sized brokerages may affect your income as a business owner, plans for new employees, pay raises for employees and certainly put a halt to thoughts of expansion. Many businesses have failed for lack of cash flow; this includes large corporations as well.You may be able to secure a loan to “tide you over”, but the reality is that the interest you pay will become a further hindrance to profits.

Not Getting Paid at All

The second scenario is that you don’t get paid at all. The downsides to this are enormous and so much worse than not getting the revenue. You have paid the truck line; you have paid your employees and you have paid your rent, insurance, etc. In reality you have paid out 95% or more of that expected revenue in return for naught. The trucking industry has a higher-than-average bad debt ratio due to never having equity in the freight you are moving. So now you are faced with using your time or employee time to try and collect your monies; to recover monies through legal action is expensive, and even if you are successful in getting a judgement that is only half the battle. It still has to be collected. A judgement is not a guarantee that you are going to receive payment.

Even Large Companies Declare Bankruptcy

To be successful your business model should always include regular credit reports on all your customers, not just the new ones. Established customers that are a large portion of your income are more likely to have an unfavorable impact if their business fails. Remember that even the giants in an industry do declare bankruptcy.

Run Credit Checks Consistently

To be aware of these possibilities you must look beyond your own payment experiences and see what is happening through the eyes of others. How you do that is by getting a credit report. How you do that best is through a credit report that allows you to focus on others who are within the same industry. Do the experiences of other freight brokers and truck lines match your own? Too great of a variation certainly should raise a red flag.

TransCredit has been generating transportation specific business credit reports for over 35 years. We produce credit reports and scores using our unique, proprietary algorithm.Contact us today to become a member and gain access to our robust database!