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1. Are credit reports damaging your business?Ed StrangROSS STRANG LIMITEDwww.businessfitnesscentre.co.uk @ netLinked Bishop’s StortfordROSS STRANG LIMITED The Business Fitness Centre1

2. IntroductionI am Ed Strang, an experienced Chartered Accountant & former Finance Director of an international services company. I established ROSS STRANG LIMITED and started the Business Fitness Centre recently – a business advisory service dedicated to helping you and your business achieve success. In addition, to business strategy, finance and commercial advice we also specialise in credit management services.I joined a network of former senior directors, Stewart Enterprises Limited, with extensive business experience including unrivalled knowledge of the credit reporting industry. Together we have developed tools to help business owners and managers [and the accounting / audit profession] understand credit management and its impact on your business. We can help you to optimise the credit report for your business.Corporate Credit Report [also known as your “Business File”] There are over 2.6m limited companies in the UK. Each company has a Business File from incorporation, building up a history and credit profile. This is based on information filed at Companies House – including Memorandum & Articles of Association; forms confirming the appointment and resignation of directors, issue of shares & other legal notices, annual returns and annual accounts. Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre2

3. What is a corporate credit report (or Business File)?Credit agencies such as Dun & Bradstreet, Experian, Equifax and Riskdisk produce up to 29ft. of information on each UK and international business. This covers the history of your business as a limited company, including latest accounts. Certain suppliers include payment history trends based on their access to large corporate sales ledgers!Why use credit reports?You need to know who you are doing business with. A simple example, if your customer cannot pay your invoices, you suffer 100% loss of cash inflow ….. but you still have to pay wages, suppliers and overheads …... AND this dramatically reduces your profitability! Do you use credit reports (to monitor)?Customers

4. Suppliers

5. Other trading partnersDo you know what your credit report tells ALL interested parties?Good or Bad Credit Score?Is it accurate?Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre3

6. Who views your corporate credit report?Customers – Existing and NewSuppliersBusiness PartnersBanksTendersGovt. Depts.CompetitorsPotential Acquirers ……………………………………………………….. and CriminalsWhy do they use credit reports?Risk management – credit exposure / track record / continuity of supplyCompliance with corporate guidelinesPlanning, including acquisitionsAgain, Do you know what your credit report tells ALL interested parties?Good or Bad Credit Score?Is it accurate?Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre4

7. Does he understand your business?ROSS STRANG LIMITED The Business Fitness Centre5

8. Is your report adversely affecting …….Sales

9. Business development

10. Tender competitiveness

11. Supplier pricing – reducing your competitiveness and margin

12. Bank credit rating & terms

13. Hiring senior staff?Why? What influences the credit report reader?Low credit score or “Credit Suspended”

14. Poor financial ratios ….. Fair - or unfair (to be explained)

15. County Court Judgements

16. Borrowings

17. Late filing accounts

18. Late filing annual returns

19. Payment history Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre6

20. Credit ManagementAccounting firms are tasked with producing the statutory accounts and having them filed at Companies House on behalf of clients The client sees this as a compulsory task , a piece of red tape , a chore

21. One could argue they treat this lightly , they have little real interest Our experts have analysed literally hundreds of thousands of sets of accounts over the last 30 years. As accounts are produced to a standard , its understandable that there are very few differences between the lay out and the content, but Statutory accounting has changed over the years!

22. The regulations have changed! Some would argue that the biggest losers are those who analyse the finished product to assess and protect themselves from commercial risk. Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre7

23. Important changes affect the outcomeThe information, content (abbreviated filing regulations) and reliability (removal of audit) of the information filed at Companies House for over 94% of GB Limited has reduced dramatically over the past 20 years.Removal of Audit & Small Co Threshold £90,000> Increased to £150,000Increased to £500,000

24. Then £1.2 Million

27. Now£6.5 Million (and less than 50 staff) SMALL?The volume of access by Credit Control, Business Development, Supply Chain Management, Local Authority, Non Govt. Organisations and Banks has increased dramatically - and will continue to do so - especially during tough trading conditions and a difficult lending environment. Over 10m searcheslast year!Your Credit Report and the way it being interpreted is more important to the future success of your business than it has ever been. Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre8

28. Abbreviated accounts – do NOT showSales

29. Gross Profit

30. Overheads

31. Dividends

32. Breakdown of Debtors

33. Breakdown of Creditors

34. Bank OverdraftAnalysis is almost impossibleIs turnover, margins, overheads increasing / decreasing?

35. Did your business make a profit (& pay a dividend) or make a loss?

36. Do you have short term obligations to meet ……. Or directorsloans, which will not be payable for over 12 months?Does this matter ………. Absolutely!! This changes the EXTERNAL image of your business!! Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre9

37. Credit ManagementThe accounts you produce are readily available to any individual or enterprise in the world. Our focus is not on the enquirers who access and analyse the accounts which you have prepared.

38. Our focus is on the conclusions they reach

39. Conclusions based on the accounts prepared for you business

40. And the knock-on effect these decisions will have on your business

41. Effects which can be far reaching

42. Effects which the MD is acutely aware of but rarely understands why they are happening Some will are argue that Accountants have lost millions in lost fees

43. Others would argue those seeking to mitigate risk are the biggest losersArguably, it is the company being assessed that loses out!Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre10

44. The Company being assessed, could be your business If you pass the supplier vetting then whatever transaction, project or contract they wanted to engage in would not be Held up

45. Delayed or

46. Lost Fail the vetting process and the MD is likely to be aware they did not win. The MD of an SME may not know what credit rating they have, but they do know they can rarely afford to miss out on any opportunity. What percentage of businesses would get a Green Light? 80 %

47. 60 %

48. 40 %

49. 20%The most common rating (c60%) set by D&B , Equifax, Experian & Riskdisk is ZERO – Code Red Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre11

50. External Interest In Your Accounts Companies House reports in 2010 that 98.4% of all business files are accessed (viewed) within 60 (SIXTY) SECONDS of the new account information going public. Business Information Agencies (Like D&B , Equifax, Experian & Riskdisk) have electronic updates & normally have new accounts analysed and interpreted in a new report within 24 Hours.Companies that have an interest in your business will be alerted to the new assessment in the time it takes an electronic signal to reach them!!What will the next set of accounts produced for your business trigger?The impact of Stage 4 Effect can be devastating when credit limits and contract limits are withdrawn.Banks activate secured chargesBanks call in overdrafts Trade suppliers put accounts on stop Insurers prohibit additional trade credit supplyDeals in progress are lost Warning – Act NowCredit Limit Withdrawn Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre12

51. What can you do to improve your credit reports 1. Review the ever changing statutory accounting process from a Credit Management perspective, rather than an accounting perspective. 2. Business owners should treat the production of annual accounts as a managed process. Traditionally, they may not have the skills or knowledge, and few consider it important.Business owners quickly realise that this is more to do with revenue generation, winning business and facing fewer road blocks ahead. 3. Understand the information to be presented & opportunities to help credit analysts improve your credit score. This is often simple house-keeping, better transparency and might even be timing!A firm of Accountants in Ayrshire commented “I have been a CA in the UK & Canada for 40 years and have never considered these issues from the Credit Management perspective. It makes complete sense but you need to come at it from that angle. I think I am in shock.” This is not unusual!Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre13

52. The opportunity to take control If you know what analysts need to positively rate your business, then you can review your current processes and if appropriate improve them.We believe that at least 60% of companies should be coded green (with a reasonable credit score) – and our training will ensure that you get a rating which reflects your real position. Our clients will then have an improved capability in bidding for work and projects

53. Our clients can move forward without artificial obstacles in their way

54. Our clients enjoy improved revenue generation

55. Our clients can be confident on the impression gained by any would be enquirerNever heard of this ………?Ask your accountant, why they haven’t addressed this issue for your business!Don’t accept stock answers that “competitors will use this info….. “ or “it will cost a lot more.” I am happy to supply & discuss your latest credit report, without obligation. Call 07798 744106 now.Are credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre14

56. Final thoughts We are dedicated to True & Fair View and all guidance is focused on ensuring Limited Companies only look as strong as they actually are. We consider that for a variety of reasons the majority of companies in the UK actually look poor on paper, when in fact - with greater transparency and aTrue & Fair View was obtained - they would be much stronger.

57. Be careful how you interpret credit reports on your customers, suppliers & other trading partners!

58. My experience – as a Finance & Commercial Director - shows that many credit reports are misleading. I spent precious time to get a better understanding of customers & suppliers ….. But many companies & govt. depts. will simply remove your business as a trading partner!!

59. We consider Credit Repair Companies who seek to remove negative information by unlawful means to be unethical. Don’t let misleading credit reports damage your businessAre credit reports damaging your business?ROSS STRANG LIMITED The Business Fitness Centre15

60. Credit Management Strategy fromROSS STRANG LIMITED The Business Fitness Centre16

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