How does filing accounts impact your credit score?

Incorporated businesses have to file accounts at Companies House within 9 months of their year-end. This means anyone with access to the internet can find out when you have filed your accounts and trace each filed set of accounts since the company was formed.

Every time a form is filed with Companies House the credit agencies register it and review your credit score. Sometimes this can be very arbitrary. I have seen the filing of a confirmation statement with no changes sometimes cause the credit score to drop by 1 point or raise by the same. These are probably indications of a correction due to market or industry conditions.

When annual accounts are filed however, the change in the businesses credit rating can be large. And not all agencies score the same! Here are some items to look out for in year-end accounts:

Reducing cash value
Net current liabilities
Net liabilities (a negative balance sheet)
Late filing of accounts

All of these factors could have a negative impact into assessing your business’s financial position, so we recommend keeping an eye on each of these figures throughout the year with particular importance towards your year-end.

Most business owners focus their attention on the profit and loss account. Ultimately that is where your money is made, but the balance sheet is the document that shows the world at large how your business stands at the year-end.

If your results have improved, it is worth filing your accounts before the deadline to project your strengthened position to the market. This will install confidence in your company’s ability to meet its debts.

If your results have declined, you have a few options available including changing your year-end or having an active plan to file this year on deadline day but work towards next year’s being filed as soon as possible, to limit the period of poor rating.

What should I be aware of on other businesses’ credit limit?

All the above ratios should be considered when looking at your competitors too! Is their cash position getting worse?

If you work on tight margins, delayed payment or non-payment could be extremely damaging to your business. I’m not saying don’t do the business but maybe consider having an honest conversation with them and/or ask for a deposit that covers some of the costs in advance of work to limit your exposure.

It’s also worth bearing in mind that this business maybe given far too much credit if all their suppliers provide them with the maximum suggested! You only have to think of it in terms of how much credit we’d all be given if we applied for lots of credit cards, often much more than we could afford to pay back leaving us stuck with huge interest on a monthly basis with little to pay off debt.

Get in control of your business

Our best performing businesses at A4G all have one thing in common: They have an annual pre year-end planning meetingwith their Principal Adviser, 6-8 weeks before their year-end, to ensure all these issues are considered ahead of time.

You can do this too.

Rather than have a frustrating meeting with you accountant who says, “if only you’d done …”, start planning before. We can help you put together a detailed action plan for the next 6-8 weeks ahead of your year-end to help ensure you’re aware of the expected results and what you can do to influence these whilst you still have time.