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Service: Credit Management
Date: 27/09/2012
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Understanding Credit Terminology
ICSM’s guide to commonly asked questions

Getting to grips with the terminology associated with credit management is essential. In this instance, ignorance is not bliss. Anyone who does not have a comprehensive grasp can easily take one wrong step based on their lack of understanding and lose money.

Here, ICSM’s experts highlight the most common questions they face on a day-to-day basis and share their responses:

Ian Carrotte, CEO
Ian has been at the heart of ICSM’s operations since the company was founded in 1991. Working closely with the printing and courier/logistics industries, he strives to connect businesses and allow them to make credit decisions with confidence.


Christopher Moore, Marketing Manager
Chris has developed through ICSM and is now responsible for the marketing department. He has an in-depth knowledge in the printing and office solutions industries and publishes articles/blogs for small business and start-ups.


Rupert Rudd, Investigations
Rupert joined ICSM in its early days and has been instrumental as a liaison between the printing industry and, on occasions, the police. Rupert is responsible for investigating rogue businesses and identifying directors who exploit legal loop holes.

Q) ICSM’s credit reports give companies a score based on their creditworthiness. How do you reach that figure?

Christopher Moore - Credit ratings are based on a complex matrix that evaluates a number of key indicators as to how well a company is performing. These take into account trading history, directorship composition, existing County Court Judgements (CCJ), filed accounts, financial liabilities etc. Scores range from 0 to 100 and are awarded based on the probability the company will continue to trade for the next 12 months. A score of 99 indicates there is a 99% chance of the business remaining operational for the next year and so on.

Q) How do you then calculate your suggested credit limit?

Christopher Moore -
The greater the score, the more likely the chance you’ll see a suggested credit limit. Don’t assume that because a company has a towering credit rating it will have a matching limit, the size of the company and the accounts they’re filing have to be considered. Limits can range from pennies to hundreds of thousands of pounds after all the different factors have been considered.


Q) What happens with companies that score badly?

Christopher Moore
- Any company that is scored below 30 is immediately given a ‘0’. If we believe that their chance of survival is less than 30% then we wouldn’t suggest that you talk credit terms with them. Once the rating rises above 30 a new limit will be calculated, this can be anything from £500 upwards.


Q) What does ‘technically insolvent’ or ‘financially valueless’ mean?

Christopher Moore
- These terms are often used by credit report agencies. They describe the situation where a company’s liabilities outweigh the assets. It could owe more than the company is worth but it is still operational. Here additional factors such as trading history should be taken into account to assess credit worthiness.

Q) Will a new company always score badly as it has not yet filed accounts?

Ian Carrotte -
No, not necessarily.  ICSM recently gave one new operation a score of 57, this was based on the number of directors and their ages, any other directorships they hold (active and dissolved), the corporate structure, lack of CCJs and its demographic. All of these factors can create firm foundations for a flourishing business with a successful future ahead of it.

Q) An ICSM Credit Reports states that the financial results of a business are
‘too old’ but I know the company is trading. Why is that?

Ian Carrotte -
Full company accounts generally cover a 12-month period, say from January 1 to December 31. Once this year is complete all companies have nine months, in this example, up to September 30, to file those accounts with Companies House. During those 9 months a credit rating and limit will still be provided on a report, this could mean that the accounts you’re looking at are as old as 21 months. It is only once the 9 months have passed that the credit rating on a report will change to ‘Financial records are too old’. There may be a perfectly reasonable reason for the late return but we would urge our members to start asking questions and delve deeper as this could be a sign that all is not well.

Q) The address on the invoice is different to the one I normally use. Should I be concerned?

Rupert Rudd
- No. All limited businesses have registered addresses, this may vary from their trading address and it could even be the accountant’s. It is a legal requirement and does not impact which office you do business with.

Q) I know that a company I was working with had a CCJ but it is not showing on the credit report. Why not?

Rupert Rudd -
If a CCJ is discharged within 28 days it is struck off of a credit report. If it takes longer to resolve then it will remain. So yes, that can mean that habitual offenders will not show up on a report if they play the system. But thanks to our comprehensive membership this is the sort of practice that if we hear about, we’ll spill the beans.

Q) Can companies be shareholders?

Rupert Rudd
- Yes, this is perfectly acceptable practice.

Q) How do I use the ICSM 7-day legal letters and do they need to be sent in an order?

Ian Carrotte
– ICSM offers three different legal letters for different scenarios and therefore do not follow a set order. They are:

  • Account Overdue - a friendly reminder that an invoice has gone beyond terms
  • Breach of Contract- designed with certain industries in mind, for example the building industry where a contract has been drawn up and breached.
  • Final Demand - ICSM’s firmest letter that tells the debtor that this is their final chance to settle the invoice before legal proceedings will be initiated.

About ICSM (www.icsmcredit.com)

Founded in 1990, ICSM is a subscriber-based service dedicated to the UK printing industry. It monitors the business activities of an operation’s customers through specialised databases, swiftly identifying any problems that arise thereby affording the operation a chance to avoid potentially crippling bad debts.


ICSM has looked after printer’s credit information needs for more than two decades. With conventional credit reports only painting part of the picture, ICSM runs a credit community for thousands of printing businesses, swapping information on those customers who can’t, or won’t pay their bills. From day one members have supplied details on poor and late paying customers. This information can uncover a history of questionable activity, or ‘professional’ credit abuse that would be otherwise impossible to pick up on.


Contact details:
Christopher Moore, Marketing Consultant
Tel (0) 1454 322234
Email: christopher.moore@icsmcredit.com
Web: www.icsmcredit.com


For PR
Catherine Carter
Tel: (0) 1489 572405
Email: catherine_kelly_98@yahoo.com

Tel 0844 854 1850 ___ Fax 01454 318 517 ___ Address ICSM, 51 Broad Street, Chipping Sodbury, Bristol, BS37 6AD
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