Why Your Business Should Contribute to a Commercial Credit Bureau
Contributing A/R Data Provides Visibility to Help You Get Paid Faster and Increase Revenue
Everyone knows the quote “be the change you wish to see in the world.” In many cases, the same holds true for business. These days, credit and finance professionals are being asked to do more with less. Traditional credit data, primarily payment behavior, has become static in enabling risk mitigation experts to take a comprehensive approach. Throughout recent years, the analysis of A/R data through a commercial credit bureau has become increasingly effective in risk monitoring across multiple accounts. Mitigating risk on a large sum of customers can be a difficult task, especially on top of all the other responsibilities that financial professionals and credit managers have on their plates. When a company has hundreds, not to mention thousands of active accounts, the exposure to potential risk and loss of revenue is much greater than those companies who are only managing a few accounts. Luckily, by taking a deeper look into the trends and changes that A/R data can identify over time, a plan can be established to mitigate risk and avoid any potential losses. Your business should be contributing A/R data to a commercial credit bureau in order to avoid any lag time in identifying risk.
Once You Understand Your A/R Data, the Information Will Work for You
As credit monitoring systems and databases continue to evolve, there’s an abundance of newly discovered business information available right at our fingertips. Companies are beginning to use this data to better understand their customers’ financial status through indicators like purchase trends, sales trends, investments, hiring trends, organizational changes, acquisitions and other relevant business behaviors. Changes in these areas often serve as predictive clues, signaling financial stress or a growth period. For example, consistent decline in a company’s largest expenditures is a signal of a decrease in sales and production, which may prohibit them from being able to pay you on time. On the contrary, increased hiring, spending on materials & shipping, or expanding to new locations are signs of growth, and could make a case for an increased credit limit.
One of the direct business benefits is getting paid faster. Contributing A/R data and trade information helps improve A/R performance. Sharing a payment experience improves the ability to set appropriate terms for credit extension based on actual payment experiences, ultimately improving the likelihood of customers paying on time. Companies are more likely to pay on time if they are aware that their payment experience is reported to major credit bureaus. Most companies take their reputations very seriously and will pay on time in order to avoid a negative credit score rating.
A Real Life Example:
One company recently closed its doors, leaving many of its’ creditors surprised. They had a generally good credit “score” and didn’t show any obvious signs of demise. Obvious is a choice word here, because the clues were hidden just below the surface; in the A/R data. The company’s behavioral patterns raised three major red flags: a decline in material spend, a decline in shipping expenditures, and a decline in operations spend. Had this data been submitted to a commercial credit bureau, who’s services hold the ability to identify the risk, the company’s suppliers could have responded in enough time to avoid significant financial loss.
Traditional credit data is old news. Analyzing a company’s payment history is an out-dated source of information that only tells you what you already know. Purchase behavior is shaking up the industry, quickly becoming a leading indicator of a company’s financial health. The products a company is buying along with the amount being spent on those products reveals a significant pattern of behavior which can be analyzed to determine financial standing and credit worthiness. This data continues to serve its’ purpose, providing in-depth insights and predictions about the future.
It’s no question that every company should join the network of A/R data submission. Very much like consumers, businesses can be defined by their behaviors; how much they pay, how quickly they pay, where they invest, who they hire, and how they conduct business both internally and externally. All of these factors tie into a 360 degree view, therefore determining risks and identifying opportunities. Commercial credit bureaus who know what they’re doing, like Cortera, are changing the industry, providing the next-gen solutions that are essential to the futures of today’s businesses. We provide all of this information in one, real-time, easily accessible location. Contact us today to learn more.