Why Company Credit Checks Matter More Than Ever In 2024

As global volatility continues to be the new norm, 2024 is unlikely to be plain sailing. Both at home and abroad, the economy remains fragile. The repetitive market shocks of the past few years remind us that anything can happen, and you must be prepared. 

Reliance on basic credit checks is a risky move in turbulent times. A comprehensive credit check can give you the knowledge you need to confidently conduct your business in the new year. 

How do you know your company credit check is robust enough to protect your business? Not all credit reference agencies offer the same level of service. At Company Watch we use a combination of unique, industry-leading scoring and forecasting tools. This cutting-edge technology will give you unparalleled insights to make confident, data-driven decisions.

Let’s look at the risks you may face in 2024, and how our company credit checks can help.

What does 2024 have in store? 

As we hit the first week of 2024, we’ve been looking ahead to assess some of the key risks our customers might face over the next year. Here are some of the key risks that should be on your radar.

Insolvencies on the rise

The effects of rising mortgage costs, a global downturn and falling income continue to be felt across the UK. This means the economy will likely be stuck in recession throughout 2024.

The Confederation of British Industry (CBI) has projected that the Bank of England won’t cut interest rates until 2026. Businesses took on unprecedented levels of debt to survive the pandemic. The financial strain of continued high-interest rates means that around 7,000 businesses will likely fail in each quarter of 2024. You need to ensure that your company credit check effectively assesses the risk of bad debt and insolvency in any potential partnerships. 

Geopolitical uncertainty

You’ll be well aware of the various conflicts remaining at the forefront of the global news cycle. The ongoing conflict between Russia and Ukraine, the war between Israel and Hamas, and ongoing US-China tensions will remain on your radar in 2024. These conflicts are likely to have knock-on effects on supply chains, energy markets, and global trade. When taking on new business, you need to know if a company or their suppliers have been affected by, or exposed to this increased geopolitical fragmentation. 

Increasing reliance on AI

Another key risk for you to be aware of is the increasing over-reliance on AI in the financial industry. While AI adoption brings opportunity, there are also challenges and risks when it is relied upon too heavily. Many credit reference agencies rely solely on AI to conduct their company credit checks. This obscures the risk calculation process and leaves you open to risk. If AI is left to conduct this process alone, you may lose control over the process.   

Global AI investment is set to reach $200 billion by 2025, so this adoption across the financial industry is not likely to slow. You need a company credit check that guarantees transparency and gives you control over your financial decisions.

Inside our Company Credit checks

At Company Watch, our company credit checks use innovative tools to provide a service you won’t find anywhere else. Our solutions harness the power of machine learning while maintaining transparent, easy-to-understand reporting. Here are just some of the tools that set us apart from the competition:  

H-Score®

H-Score® is our industry-leading financial score for predicting business failure. It looks at a company’s finances from a number of angles including profit management, working capital management, liquidity, and asset funding. Scores are based on how closely a business resembles failed businesses. Scores of 25 or less are placed into our Warning Area. The vast majority of companies that collapse have previously been in our Warning Area. 

TextScore®

TextScore®  is another unique tool that looks at financial risk through a different lens. It uses advanced machine learning to delve into the text of financial reports and analyse the sentiment of thousands of words and phrases. If language patterns are similar to a failed company, the company in question may also be at risk. Just like H-Score®, a score between 0-100 is given. 

Combined Score 

Our combined score is one of the many reasons our company credit checks are second to none. This weighted combination of H-Score® and TextScore® provides you with the most accurate predictor of company distress on the market. 

Probability of Distress (PoD®)

With uncertainty set to continue into next year and beyond, forecasting is an essential component of any robust company credit check. Our credit reports will provide you with a PoD® percentage indicating the probability that a company will experience financial distress in the next 1-3 years. 

The ability to look ahead will give you an unbeatable edge when it comes to mitigating risk and growing your business. 

SearCHeD 

SearCHeD  is another game-changing tool that takes hundreds of thousands of image files from Companies House and turns them into searchable documents. This gives you the power to search company reports in seconds. You can search for broad terms or specific keywords. 

We recently used this tool to search the entire UK database for the word ‘Israel’ and found that 787 companies had mentioned it in their finances. We were then able to narrow this dataset down to the top 10 companies with the most mentions. 

For a more detailed look inside our credit reporting, download a sample report. 

Get your company ready to take on any challenge 2024 throws at you.