As an electrical contractor, you may already know the importance of credit ratings. Perhaps you have worked hard to maintain a good credit rating in order to access funding and win projects.
But credit checking should not be a one-way street!
You should care about the credit ratings of those “upstream” as much as they care about yours. In most projects, you complete work before being able to apply for payment, and there is usually at least a month between payment application and receipt of payment. Essentially, you are giving your employer (or main contractor, when working under a sub-contract) short-term loans. For longer projects, you may be giving a loan every month for years. So, you should credit check your employer, just like your lender would credit check you!
You may also want to place an order – with a sub-contractor, sub-consultant, agency, wholesaler/retailer or manufacturer – but before you do, credit check to know who you are dealing with! After all, if they let you down, your business may then be compromised and let your client down.
You may also want to credit check a company when it already owes you money. In that situation, a credit report will help you and your advisors decide whether (or how much) to invest in chasing the debt. If the company is unlikely to have the asset to meet any judgment, you will not want to be throwing good money after bad.
For ECA Members, credit checking is now easier than ever. ECA offers members free credit reports – send your request to legal@eca.co.uk quoting 'Credit Check' with details of the registered name, number and address of the company you would like to check, and we'll email you back with a report as soon as we are able. This may take 48 hours during working days.
The credit report will contain useful information on the company’s payment data, its key financials in the last 5 years, the identities of the people behind the company, court judgments against the company, and more. There will be a wide range of information from various angles to help you decide whether the company is good to work for and exposing any red flags which you should be wary of.
The more intel you have the more informed your commercial judgement will be!
Find out more about the services the Legal and Business team offers to ECA Members here.