Procurement professionals face many problems in these difficult economic times as they strive to maintain supplies and drive hard bargains to preserve pressured profit margins, but one thing they can no longer afford to ignore is how their own company’s financial health is viewed by the credit managers at their key suppliers.

A sudden cut in your credit limit can interrupt supplies; in extreme cases it can bring down your company. Much of the carnage in the UK retail sector in the run up to Christmas 2008 was caused by credit insurers pulling cover and suppliers walking away. Woolworths was one of the most high profile victims of this scenario.

So buyers need to work closely with their finance departments and senior management to do all they can to present their company in the best possible credit light. Credit risk management is now high on the agenda of their suppliers.

Many of the solutions come down to nothing more than good housekeeping, like making sure your accounts have been filed on time. Over 80% of all UK companies that go into Administration or Liquidation had filed their last accounts late or not at all. It’s a big red flag for credit managers.

Lots of companies have old redundant charges still registered against their assets on their Companies House file, such as mortgages over properties for loans long repaid. Getting rid of these by filing a memorandum of satisfaction improves your credit profile, although you may need to be patient with the bureaucracy at the original lender, especially if the debt was repaid a long time ago.

Surprising numbers of companies have inaccurate descriptions of their business activities in their accounts, which can push them into a higher risk category, especially in this era of tick-box automated credit scoring models. Correcting this is straightforward.

One major change in the credit management industry in recent years has been the move to assessing risk on a group basis, rather than by individual trading subsidiaries. Crippling debt is often hidden away in a holding company or some opaque offshore subsidiary. The collapse of Oddbins in March 2011 was a perfect example, where the operating company looked perfectly healthy but the group was rotten to its financial core. If your company is part of a group, find out what the bigger picture is and neutralise suspicion by explaining the group structure and where possible, simplifying it.

No credit manager or their trade insurer can ignore a negative equity position in your balance sheet. Prima facie, your company fails one of the solvency tests set by the Insolvency Act. So do what you can to correct this, either by introducing more equity or by converting debt into equity, perhaps by agreement with your bank. Of course this can be tricky, but it may be an option if the move recognises the reality that the debt cannot be repaid. There may be management loans in the balance sheet. Much as it may hurt to lock these up as equity, it might be the answer to your adverse credit rating.

Excessive dependence on short term, on-demand debt such overdrafts is seen as a weakness in most credit scoring models. Think about turning all or part of this into a longer term loan, which will move it into a safer place in the balance sheet and improve your credit score. Better still, replace it with equity, but that may not be so easy.

Remember too that the information in the public domain about your company may be seriously out of date. Your 2010 accounts may not have been filed until the end of September 2011, so they are already nine months old and may reflect a much worse trading profile than shown by your current management accounts. Be prepared to share management information with suppliers to change their perception of where you are financially, including forecasts and any supporting data, plus news of positive developments in the pipeline

There’s also no need to lie down and just accept a cut in your credit limit. Get into a dialogue with your suppliers and where necessary their credit insurers as well. You may be able to do this yourself, or your insurance brokers may be able to help you broker better terms if there has been a misunderstanding, or if there has been a genuine improvement in your financial position. They may have a good working relationship with the credit insurer rating your company, which can assist in the negotiations.

At the end of the day, no supplier wants to lose your business in these tough times, but they also need to be convinced that you can pay them. Anything you can do to help them go on trading with you is in everybody’s best interests.