You'll already know how important your business credit rating is to obtain future finance - but did you know how much impact a late payment can have on your creditworthiness? 
Late payment effects 
Banks and other lenders will review your business's payment history (and potentially your own individual history too, depending on your business set-up) when they decide whether or not to extend credit or issue a loan. If you have a solid history of timely payments then the bank will view you as a reliable and responsible borrower and be more inclined to lend. Conversely, a history of sporadic, late and missed payments will identify you as being a potentially problematic customer who might never repay a loan and lead to a costly loss for the lender. The result is likely to be a declined application - which further damages your credit rating and indicates to other lenders that you have already been turned down. 
Red flags 
Business payments are one of the biggest indicators of a business' financial health and good management and an instant red flag where problems exist. 
Late payments and credit reports 
Late payments are flagged up to the main credit agencies and show on your business credit report. This information can remain on your report for up to seven years, continuing to impact your business's ability to lend long after the event itself. 
Lowering your credit score 
Information about payment history typically comprises around one-third of the total credit score, which makes it the single most important determining factor for your perceived creditworthiness. Even one single late payment can have a negative effect, taking you out of an 'excellent' or 'good' credit category and dropping your business down a notch. 
The costs of late payments 
You'll be charged late fees if you don't settle up your bills on time. Another effect can be higher interest rates, which can severely impact your net profitability. 
Persistent late payments 
Bear in mind too that a persistent habit of late payments can lead to delinquent accounts and the risk of collections or court action. Businesses such as help businesses with debt collection services when their own customers fail to pay - and no business wants to end up on the receiving end of collection or litigation! Again, any business bank accounts in collections will be flagged negatively on the credit report for seven years and result in an even lower credit score than late payments. 
Remedying the damage 
Put direct debits and standing orders in place for regular payments and review your internal processes to ensure that suppliers are set up on the right payment cycles and that your internal authorisation processes are efficient enough to allow for timely payment every time. 
For any overdue bills, pay as soon as you can - the damaging effect on your credit score will get worse as your payment delay, known as delinquency, gets longer. 
If you don't have the dedicated internal resource to manage your business finances and payments system, consider using a flexible outsourced provider for expertise and guaranteed timely delivery. This will help you to rebuild your business credit rating if it has been damaged and will allow you to operate as a professional business. 
Keep an eye on your credit report 
Remember, you can obtain your business credit rating and other bespoke commercial reports using the simple online system. Get yours today and get the facts that you need to manage your business - and its finances - effectively. 
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