Net Accounts are a great way for your business to get necessary supplies and inventory while managing monthly cash flow. However, many small business owners and entrepreneurs aren’t aware of how beneficial Net Accounts are for building a strong business credit profile.
What’s a Net Account?
A Net Account is essentially a line of credit extended to your business from a vendor or supplier. The terms for repayment are typically 30 days, however some accounts extend longer or shorter payment periods. For Net 30 Accounts, the total balance of your bill is due within 30 days.
As you know, Net Accounts have two interconnected benefits—they allow you to get the supplies and inventory you need while helping you manage your cash flow throughout the month.
Net Accounts have another benefit that’s even more valuable for your business; the ability to build a strong repayment history and strengthen your business credit profile.
Net Accounts allow your business to demonstrate its professionalism and trustworthiness. When you maintain on time or early payments with your Net Account holders you develop a history that positively impacts your business credit score and profile.
In this way, Net Accounts are a lot like your first credit card. Your first credit card probably had a low limit and a high interest rate. While its purchasing power was limited, it allowed you to demonstrate your creditworthiness and build a credit history.
A Tale of Two Borrowers
Net Accounts remind me of my first two friends to get credit cards. One handled it the right way; one the wrong way. When my friend Chad got his card, he went straight to the mall and maxed it out. He bought things he didn’t need, missed a few payments, and eventually his account went to collection.
My friend Naomi got a credit card around the same time as Chad.
Listening to the advice of her parents, she used it for gas and small purchases only. Every month she made at least the minimum payment, often paying off the entire balance. She made small purchases every month and quickly created a strong history of timely payments and trustworthiness.
6 months later they both applied for a new credit card. Only one was approved for a card with a higher limit and better terms. As you can imagine, it wasn’t Chad.
Net Accounts work in much the same way. When used correctly, they provide a way to get needed supplies and inventory while managing cash flow and building the foundation for robust business credit.
By paying your Net Accounts on time or early you can build a solid Paydex score with credit bureau Dun & Bradstreet. This score is the first step toward building a strong credit profile your business can put to use.
Put Net Accounts to Work for You
Many of the vendors and suppliers you’re already in business with offer Net Accounts payment terms. When you place your next order, ask if they offer Net Account payments.
But don’t stop there. Many vendors and suppliers don’t report your payment information to the business credit bureaus. It’s a good idea to request they report your payment history so you get full credit for your timely payments.
Don’t wait until your Net Accounts are due to pay your balance, pay it off early for even more benefits. Your Paydex score will reflect early payments.
Did you know that a Paydex score ranges from 1-100?
A score of 80 means you pay your Net Accounts on time. To get a higher score you need to pay your accounts early. Early payments can yield a higher Paydex score, giving your business a stronger credit profile.
Build a Solid Foundation
Net Accounts offer many benefits for small business owners and entrepreneurs—you get needed supplies and inventory, the ability to more effectively manage cash flow, and you get to develop and build a solid payment history and business credit profile.
Building robust business credit is one of the most valuable investments you can make in your business. Don’t leave it to chance; plan for success with TrueBuild Credit.