Please note that not paying your suppliers on time is a bad business practise and it may also result in a drop in your credit rating. You should:
- ensure you advise your suppliers of any disputes as soon as they occur
- pay on time by ensuring that your creditor’s ledger is accurately aged and
- keep your suppliers up to date with any issues you have with paying on time
Unfortunately, some businesses go bankrupt so you may wish to consider to have credit insurance where the business:
- would not be able to function if important customers went insolvent
- does not have the controls in place to ascertain whether a customer is likely to go insolvent
- is struggling to obtain information on prospective customers
- needs to improve credit management
- is considering a new market venture
Businesses should consider obtaining factoring and financing options when:
- insufficient cash reserves are available to pay suppliers on time
- the business needs to expand
- the level of short term finance (including any overdraft facility) is insufficient
staff do not have the right level of credit management skills