Business Intelligence: Way Beyond Dun & Bradstreet
Prior to establishing credit terms with a new customer, most businesses will perform due-diligence on a buyer to determine their ability to honor their obligations. The research typically includes evaluating credit reports, trade & bank references, prior payment history, and financial statements.
These methods of credit research are fairly standard but do require a certain level of skill to be able to read, evaluate, and assess financial data to properly establish credit limits for buyers. As you will soon discover – and maybe already know – using these tools does not guarantee results. The challenge many companies have relying solely on these resources is that no matter how acceptable a company may look on paper, there is really no way to determine with any degree of certainty whether the buying company will have financial difficulty in the future. Unfortunately for many companies, the bad news is often discovered too late, usually after the shipments have left the loading dock.
Let’s assume, for example, that a supplier performs their typical research on a buyer and decides to extend them a $500,000 credit limit. The supplier continues to trade with the buyer for several months, and since the buyer’s payment history has proven to be acceptable, the supplier decides to increase the buyer’s credit limit to $750,000. Several months pass with no payment delays and the supplier agrees to extend yet another credit increase to $1,000,000. After all, additional credit means additional revenue for the supplier! Everything seems to be progressing wonderfully, so it seems.
The supplier, like many other companies who get accustomed to timely payments, typically shift their focus from performing ongoing financial research on the buyer to placing emphasis solely on their experience with the customer and their good payment history. Since the buyer pays timely, the supplier sees no reason to pull back the credit line, that is, as long as the buyer continues to pay. This is where the problem often begins.
What the supplier in this example doesn’t know is that for the past several months this very same buyer has completely stopped paying their other suppliers….but they continue to pay their invoices to them like clockwork. Why is this important to know? Well, it’s a direct indication that the buyer is likely up to something – and it isn’t all that good! A possible reason for this scenario is that the buyer could be getting ready to either shut down their operations, or they could be in the process of filing bankruptcy with the goal of reorganizing under a different name. In either case, it’s only a matter of time before the buyer defaults on their obligations to the supplier, leaving them subject to hundreds of thousands or even millions of dollars in unpaid products & services.
So how does a company get the Business Intelligence it needs to access accurate financial information on their buyers and know in advance when to reduce the credit line or eliminate it altogether without getting burned? It’s actually quite simple.
Your staff can gain the business intelligence it needs through advanced credit reporting & monitoring programs that provide direct access to real-time credit ratings on millions of companies worldwide. These credit ratings are established by credit insurance underwriters who evaluate each business and assign a credit rating opinion based on information and advanced knowledge on how each company historically trades with other companies.
Imagine being able to log onto a website, enter your buyer information, and instantly receive the latest credit rating from an experienced underwriter? What if you knew exactly how much credit to give a customer on the fly – knowing that the credit rating you receive is the same credit rating that credit insurance companies use for the benefit of their own policyholders? How powerful would it be to your business to have this comprehensive research work done for you so you can concentrate on your core business and use your employee assets elsewhere?
With real-time information on your customers, you don’t have to worry about the exhausting steps and expense associated with performing your own due-diligence on the companies you want to do business with. Of course, you can always continue to research your buyers as you normally would and simply use advanced credit ratings and monitoring as additional support to your decisions, but let’s take Business Intelligence one step further. Imagine obtaining a credit rating score on a buyer in January, and in April, you receive a monitored email alert notifying you that your buyer’s credit score has been downgraded – or upgraded – and the reasons why. Do you think this information would be valuable to your company as you use it to either extend more credit to your customers or pull back the credit line if the information is derogatory?
From our professional experience, there is nothing better than having a worldwide credit insurance & information organization looking over your shoulder watching over your clients and keeping your company out of harms way. Ask D&B if they offer such a service – it doesn’t exist! D&B is a data mining company and earns fees for selling information. The key difference between D&B credit ratings and credit insurer credit ratings is the vested interest of the company and accuracy of the information. Credit opinions provided by a credit insurer are the same ones used for the benefit of their policyholders, so you can be assured that they are the best credit opinions available anywhere.
Have a question about business intelligence services? Feel free to call us at 1-888-642-4422 or contact us directly by using the form to the right.
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