How much should you spend on a company credit rating?
A company credit rating shouldn’t be seen as a one-off purchase. It’s an investment designed to protect you against future losses. While it may be tempting to look for the cheapest rating possible, it’s important to consider what you’re getting for your money.
A basic rating gives you a snapshot of a company’s finances, but it can’t help you to predict its long-term prospects. This is fine for some businesses. If your risks are low, then so are the values of these risks, meaning that a company failing is unlikely to have a huge impact on your own financial health. In this case, a simple credit score will probably suffice.
If your risks are higher, though, it’s a good idea to invest in a robust credit score. This will cost more, but it’s money well spent. Everyone wants a business class seat for the price of an economy seat, but life rarely works that way. When it comes to credit rating companies, you get what you pay for.
We may not be the cheapest service on the market, but we believe we are the best. We provide the tools to spot future risks and avoid catastrophic losses, and this represents real value for money. Here’s a look at what we offer, and why you should think twice before rooting in the bargain bin.
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Beware the black box credit score
Some credit reference agencies will give you a company credit rating for next to nothing. Some of them even offer it for free. If this sounds too good to be true, it’s because it is.
These credit scores are usually a single number, or a red, amber, or green indicator, accompanied by little or no explanatory information. These are known as black box scores because the process used to create them is hidden from the customer.
This lack of insight can be extremely dangerous. Credit scores are calculated by weighing the probabilities of various risks. If you don’t know the details of this process, you can’t know if the credit reference agencies' priorities match your own. A black box credit score may understate some risks while exaggerating others. This could cause you to expose yourself to unnecessary danger, or to turn down perfectly safe business opportunities.
The other problem with a basic credit score is that it represents a fixed point in time. It tells you the company’s financial health at the moment the score was calculated but gives little indication of how this will change in the future. With the economy in such a turbulent state, it would be naive to base long-term decisions on such limited information. Luckily, there's a better option.
◼️ Read about the dangers of black box scores
Take the risk out of financial risk management
If you’re working in an area where losses represent an existential threat, you need to take every precaution to spot threats on the horizon. This is where the real value of our service becomes apparent. Our ratings go far beyond those of a traditional credit reference agency, making us the natural choice for high-value portfolios.
Unlike our competitors, we don’t just look at the present state of a company. We look at similar companies that have failed in the past and use this information to gauge the level of risk.
We express these findings via our core credit rating: H-Score®. This is a number from 1-100, with a score of 25 or less suggesting a high likelihood of failure in the next five years.
While other scores are inscrutable, the H-Score® is completely transparent. We provide detailed information to back up our conclusions, as well as a wealth of other tools that allow you to dig deeper:
- SearCHeD lets you search for keywords in hundreds of thousands of Companies House documents. You can vet potential clients by looking for terms that are indicative of instability, or you can search for weaknesses in your existing portfolio. This helps to reduce both procurement risk and supply chain risk.
- Forecast View™ uses the latest in financial modelling to stress test company finances. You can simulate a range of scenarios, including a spike in interest rates and the loss of a key supplier. In every case, Forecast View™ adjusts the company’s H-Score® to show exactly how it would fare. This allows you to take a proactive approach to financial risk management. You can see what the worst-case scenario would look like, and take the necessary steps to protect yourself.
📙 Take a deeper dive into the features of Forecast View™
How much does Company Watch cost?
We’ve mentioned the cost of other services, so we should talk about our own prices. We can’t give an exact number because our pricing is modular, meaning that you only pay for the services you want. We also stagger our prices depending on the number of users. This ensures that smaller companies don’t pay too much.
We offer three pricing plans, ranging from basic to comprehensive. These start from as little as £395 per month. To put this in perspective, it’s worth looking at a specific case.
We recently signed a client who had been using basic credit scores to calculate risk. The company had been hit with three key supplier insolvencies in quick succession, all of which its previous credit reference agency had failed to predict. This led to total losses of over £60,000.
We can’t predict every risk, but we could have done a lot to avert this scenario. The customer could have used our portfolio alerts feature to find weaknesses in their supply chain ahead of any distress events. All these suppliers were showing as at risk of bankruptcy on the Company Watch system, reflected in their H-Score® ratings.
With this information, the client could have used Forecast View™ to simulate the collapse of each supplier. This would have allowed them to shield themselves from the worst of the losses. In short, spending £395 per month could have saved them up to £60,000 and a lot of stress.
This is one example of many. By helping you to spot dangers on the horizon, our tools are likely to pay for themselves in no time. Arrange a free trial and find out how much you could save.
Disclaimer- The past performance of a company is not always an indicator of future success. Read our terms and conditions here.