Purchase Behavior Predicts ITT Tech Bankruptcy
Predictive Analytics Prepare B2B Customers for Downfall
We’ve all heard the story one too many times; Company A extends trade credit to Company B because Company B has a good credit score. Suddenly, Company B closes its doors or files for bankruptcy, and Company A suffers a major financial loss. This is what happens when businesses don’t use predictive analytics to prepare for their customers’ downfall. The recent ITT Tech bankruptcy left some companies in the dark. Luckily, those using the power of predictive analytics took notice of key risk indicators and were able to react in time.
The key message that Cortera continues to drive home is that a business’s credit score, based on payment history alone, is not a detailed enough representation of their current financial standing. Companies who consistently pay on time may exude an illusion of good financial health, however that is not always the case. ITT Tech’s credit score remained high for years, giving off the impression that they were a low credit risk. Then in September of 2016, they filed for a Chapter 7 Bankruptcy, shocking other businesses who had only looked at their payment history, who hadn’t taken a look at their purchase behavior. Cortera’s predictive analytics picked up on 3 major red flags: a decline in materials spend, a decline in operations spend, and stagnant shipping. Cortera Pulse even picked up on the news articles that signaled a possible demise, such as sudden closing of campuses.
We took it upon ourselves to pull ITT Tech’s credit report from another leading commercial credit agency. What we found was that months later, they still weren’t reporting on the bankruptcy or linking any of the records together to show ITT Tech as a high risk. Traditional credit bureaus never saw it coming, but Cortera was able to identify the early warning signs months before the official bankruptcy filing.
Predictive analytics, created from purchase behavior data, go beyond the surface; telling you all you need to know about where another business stands. Purchase behavior trends uncover a company’s priorities and direction by showcasing how they spend their money. These leading indicators add a whole new dimension to credit analysis and risk mitigation.
For those still wondering how Cortera is capable of creating such advanced analytics, the answer is simple! Cortera’s data network contains over $1.2 trillion in annual B2B spend among over 10 million North American businesses. The intelligence contained within our vast database enables Cortera and our customers to use these analytics in a variety of applications, decreasing overall credit risk. For more information on Cortera’s Pulse platform, which keeps you notified daily of any potential risk factors, fill out the form here. To download the full ITT Tech Bankruptcy Case Study by Cortera, click here: http://see.cortera.com/itt-tech-case-study