Business Credit Rating

13th April 2016

Business Credit Rating: Poor rating hurting your business?
If there is one positive that has come out of the UK’s double-dip recession, then it is reminding businesses of how important their credit rating is. In many sectors, both suppliers and customers have now re-engineered their processes to routinely look at a company’s credit ratings. Within the UK, Experian is one of the major credit rating agencies, assessing credit risk using it’s ‘Delphi Scorecard’ index:
 Score            Risk Rating
91-100            Very Low Risk
81-90              Low Risk
51-80              Below Average Risk
26-50              Above Average Risk
16-25              High Risk
1-15                 Maximum Risk
0                      Serious Adverse Information/Dissolved 
This Delphi score is calculated using an algorithm based on:

  • Average current trade creditor days,
  • County court judgements (business & directors),
  • Worst consumer score of director,
  • Insolvency events reported in London Gazette,
  • Lateness of filing of financial statements,
  • Poor financial results (inc net worth & current ratio),
  • Recent increase in credit applications tracked through previous searches.

In most cases, SME’s submit abbreviated accounts to Companies House, so there is very little data available to Experian to calculate their Delphi score. So what can be done to improve your Delphi score (beyond trading out of your current weak position):

  • Submit accounts to Companies House before deadlines.
  • Manage the timing of filing accounts on the public record at Companies House, so as to delay/minimise the period of bad news and advance/maximise the period of good news.
  • Consider changing your accounting reference date, if it presents a stronger balance sheet or delays the filing of bad news or advances the filing of good news.
  • Reschedule and disclose directors loan accounts as a long term liability rather than a short term liability,
  • Consider options for balance sheet presentation (eg position of Accruals),
  • Convert directors loan account into equity (inc redeemable preference shares), or release it,
  • Recognise a deferred tax asset for losses carried forward,
  • Issue further equity (consider called up but not paid shares).


 
Other items in Blogs
 
Fiona Mann
22nd July 2019 Exam Success – World Beating Results!

  We’ve had some extraordinary exam results over the last few days – staff at Whiting & Partners have excelled themselves. Luke Bacon from St Ives office has achieved an outstanding result of 99% for the Financial Accounting and Reporting exam – coming joint first in the world.  This result has been recognised by the…

Read More »

Matilda Mawson
19th July 2019 Changes to Entrepreneurs Relief from 6 April 2019

Entrepreneurs’ relief allows a reduced rate of capital gains tax on disposals of all or part of your business assets. The reduced tax rate is 10% on up to £10 million of lifetime gains. There have been a number of significant changes to entrepreneurs’ relief in the last year, tightening the rules on qualifying conditions…

Read More »

Ernesta Petkeviciute
19th July 2019 New SRA accounting rules – what’s changing?

The current Accounts Rules are made up of over 40 detailed requirements, making it difficult for firms to fully understand what is required of them, as well as giving firms no flexibility to adapt them to their own practices and decide how best to look after client’s money.   The new rules coming into effect…

Read More »

Vanessa Pearson
15th July 2019 IR35: private sector off-payroll rules for contractors

This week HMRC have published draft legislation that will affect private sector personal services companies (PSCs)  from 6 April 2020. PSC’s supplying services to medium or large-sized organisations will no longer decide if they are employed or self-employed, the end engager will assess this. If caught by these rules, known as IR35, employment taxes and…

Read More »

Paul Jefferson
15th July 2019 Company car tax changes – Government will remove BIK company car tax on Electric Vehicles from 2020/21

The government has provided positive news for Company car drivers announcing that a pure electric vehicle (EV) will no longer pay benefit-in-kind (BIK) tax in 2020/21 following a review which looks set to boost sales of emissions-free cars. HM Treasury’s response to its review of the fallout from the roll-out of the Worldwide Harmonised Light…

Read More »

Barbara Nicholas
9th July 2019 31 July: Can you elect to reduce your tax payment?

Most individuals who are required to prepare and submit a self-assessment tax return to HM Revenue & Customs in each tax year should now be preparing for their next half-yearly tax payment which is due by July 31.   This tax is the second payment-on-account for the 2018/19 tax year. It is automatically calculated as…

Read More »