Bad credit and how businesses are tackling it
Bad credit is a major factor for many Canadian banks and lenders, especially when it comes to offering business loans.
Fortunately, there are a number of ways businesses in the country are remedying the bad credit problem.
With healthy finances in mind, here are just few steps Canadian businesses are taking to improve their credit:
Credit Situation in Canada
Just like its neighbor to the south, Canada is still recovering from tough economic times. As a result, credit scores in the country for both households and businesses are in recovery too.
According to a recent study by Statisitcs Canada, there was more than $5 million in outstanding balances for Canadian businesses and households in 2014.
RECENT TOPIC: The three things a CEO should never say to an employee
These balances include outstanding debt reported by chartered banks, mortgage companies, and credit unions.
In addition, nearly 35% of Canadians, including business owners, have credit scores in the 520 to 749 range. This is considered an average to extreme risk for lending agencies.
With numbers like these, the question is what are Canadian business owners doing to reverse their bad credit?
Paying Bills on Time
As the article “Just what exactly is bad credit?” asks, well, it's a low credit score that's a direct result of one of more financial factors, including delinquent payments.
One of the fastest ways a business can improve its credit score is by paying all bills on time. This includes credit card and utilities bills as well as mortgages and business loans.
When payments are even just a few days late, it can negatively affect FICO scores and reverse years of healthy credit.
Continuously making payments on time helps improve credit scores and keeps businesses in good standing with lenders.
RECENT TOPIC: Has Canada developed a medical breakthrough?
Keep Credit Card Balances Low
Just about every business uses a credit card in order to make daily purchases.
However, letting credit card balances increase can also negatively affect credit scores.
When there are outstanding debts associated with a business's revolving credit, it can lower credit scores over time.
To avoid this scenario, businesses should keep low credit card balances and attempt to pay off balances each month.
Accumulating and paying off credit card balances on a monthly basis is one of the fastest ways to improve poor credit.
Regularly Check Credit Scores
Contrary to popular belief, requesting and checking credit reports won't negatively affect scores as long as it's done through an authorized credit report provider.
By regularly checking credit reports, businesses can gain a better understanding of the financial actions that have a positive and negative affect on their credit scores.
Strict Loan Policies
In order to reverse the effects of bad credit on Canadian companies, lenders in the country are creating stricter lending policies.
Both financial institutions and private lenders are taking personal credit scores into consideration before offering business loans.
By taking a look at not just a business's credit score, but the business owner's score too, lenders are getting a clearer picture of the financial health of loan candidates. When personal credit scores are high, it's considered less of a risk for lenders.
When it comes to bad credit, many Canadian businesses are doing all they can to take steps in the right financial direction.
About the Author: Adam Groff is a freelance writer and creator of content. He writes on a variety of topics including budgeting and small business.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.