In the rapidly rising sea of information, someone got left at the dock.  It’s easy to find information on public companies.  Just go to Yahoo! Finance or do a Google search.  But go ahead and try to find information on private companies – especially the millions of smaller ones that we all interact with every day.  The limited information available about them is scattered across a multitude of hard-to-find sources and largely unstructured.

The landscape is changing.  This weekend, Cortera launched a new source of free information on small and medium sized privately held businesses (as well as large and public ones).  Cortera business profiles help businesses more easily find companies who can deliver what they need, gain insight into the stability and credibility of their existing trading partners, and identify new customers in need of their products.  Containing detailed information on business size, industry, real-world trade payment history, recent news and more, the business profiles enable companies to grow their businesses and manage risk.

Our initial launch is concentrated on the world of suppliers.  Cortera’s business profiles are designed for both suppliers and the companies that buy from them.  For buyers, Cortera profiles improve their ability to find suppliers and evaluate their health to avoid supply chain disruptions.  For suppliers, Cortera profiles assist in finding potential buyers and assessing both their capacity to spend and ability to pay.

There are millions of daily interactions between buyers and suppliers that are begging for better intelligence.  Our objective is to provide a new level of insight into private companies to support these interactions at either free or near-free price points.

We believe that greater transparency into businesses will lead to smarter commerce between them.

Today’s  question is courtesy of our eCredit software team.  The chart below is based on a review of over 10 million customer-initiated invoice disputes logged by users of the eCredit system in the last 12 months.  (total value of these cases is just under $21.7B)

While it is possible that the significant increase in dispute cases in Q3 and Q4 of 2008 is unrelated to the overall economic slowdown, the data raises some interesting questions:

• Did companies actively use disputes as a way to manage cash during a critical period? or

• As the economy tightened up, did firms raise the level of due diligence, thus discovering more disputable errors?

The flow of money through the supply chain is as crucial as the flow of goods. While the flow of goods is driven by sales, the flow of money is largely influenced by a company’s confidence that those sales will continue. Strong confidence in sales normally spurs companies to invest in growth initiatives. On the other hand, a lack of confidence in sales causes companies to conserve cash and slow payments to suppliers.

Cortera’s Supply Chain Index (SCI) is a measure of financial confidence. The most recent Cortera SCI figures indicate that, while there is clearly more accounts receivable stress than a year ago, confidence in sales may be starting to return. Two interesting trends are emerging in the latest analysis of accounts receivable data through April 2009:

• The amount of late A/R is decreasing. In April, the amount of A/R in the SCI more than 30 days past due fell to 11.0%, an improvement of nearly 16% from the December 2008 level. This represents the fourth straight month of improvement over that high water mark. Payments more than 30 days late are often the equivalent of missing a payment. That’s a marked change in financial behavior that can signal dramatic changes in a company’s financial situation. An improvement in this measure suggests a return to normalcy and financial stability in companies.
• The age of late A/R is decreasing but not as fast as the amount. April’s overall Days Beyond Terms (DBT) for the SCI also improved but to a somewhat lower degree (13.8%). So less A/R is more than 30 days past due but overall late debt continues to increase in age. This implies that companies are not missing payments as often but are guarding cash while they monitor inflows.

Even with these improvements, the current A/R performance profile is significantly below than that seen prior to 4Q08. On a year-over-year basis, DBT has worsened by nearly 34%. Will these signs of returning confidence prove to be the start of a recovery or just CFOs taking a breath after a hard fall?

When General Motors filed bankruptcy on Monday, June 1 in New York, much of the focus was on the continued loss of jobs, impact on the overall health of the US economy, and the Obama Administration’s plan for the US automotive industry going forward. In our last post we looked at the auto industry suppliers as a whole – here we dig into the suppliers most impacted by the collapse of GM.

Number one on the trade debt claim front (sixth largest creditor overall) was Starcom Mediavest Group which is owned by Publicis Groupe SA and their $121.54 million in exposure. With S&P now looking to potentially downgrade Publicis’ credit rating because of their exposure to GM, it is fair to question the impact on others listed by GM. Publicis makes the list twice with its own claim of $25.2 million, bringing their family exposure total to $146.8 million. Please find the complete list below.

GM’s Suppliers are Paying Their Suppliers Slower

A quick analysis using Cortera’s database of business payment experience shows that with an average payment risk score for this group of companies of 441, this group is already paying their suppliers slower. More than half the list fall into our “Consistently Higher Risk” Category and additional five suppliers fall into our “Higher Risk, Trending Down” category meaning that they are paying very slowly and in a downward trend over the last 3 months. Interestingly, based on the information reported to us, American Axle’s average Days Beyond Terms (DBT) is 7 days versus the industry average for auto parts suppliers of 9.16 days. Similarly, TRW Automotive is also below the industry average. On the other hand, other auto parts suppliers, including number two on the list below, Delphi, has an average DBT of 21 days–well above the industry average.

General Motors (GM) Suppliers with over $10 million in Trade Debt Claims

Are you a supplier to GM or one of their suppliers? How are you handling the bankruptcy?

Drop us a note.

I’m constantly amazed at the level of intellectual curiosity of my coworkers.  I like to think I am pretty well-read and up on the latest information, but hallway and conference table conversations around here are a learning experience about a wide variety of subjects.  It’s interesting to watch someone take a subject that lots of people are talking about and conduct some independent research, just because they want to know more.  Sometimes the research challenges your expectations.

Here’s an example: The news lately has been full of stories about the auto industry and the current difficulties the big 3 (or whatever we are supposed to call them now) and those who rely on them are experiencing.  Yesterday, one of my coworkers walked into my office with a really interesting blog post on the current reported sales figures for new cars.   (By the way- if you don’t read Barry Ritholz’s “Big Picture”, you should definitely add it to your list)   Anyway, my coworker told me that he wanted to understand how the automaker’s issues were reflecting themselves in the payment behavior of their suppliers.

So we pulled some numbers, and here is what we saw:

To say we were surprised was an understatement. We expected to see continual degradation of payment behavior and ballooning debt.  Could these numbers represent increasing confidence by these manufacturers?

Despite the progress shown above, the industry is still hurting; remember that on Tuesday, I posted that the benchmark past-due percentage across all industries is 12.95% .  A/R currency for these firms remains almost 1% below the overall manufacturing level of 81.05%.

We’re still working on the final numbers for April in other industries- stay tuned for additional snippets of data as we finish our analysis.

As you might imagine, we’re data geeks here at Cortera; and with over $250 billion a month of payment records to play with, we spend a fair amount of time trying to interpret and summarize what we see.  One of the statistics that we thought was striking was the percent of payments that were reported past-due in the most recent reporting cycle.  Overall, payment behavior continues to slow: across all industries; if you were owed a debt in March, our data shows you waited 12% longer to get paid than you did at the end of last year.

Given the contraction in consumer spending, none of us are particularly surprised at the retail figure below; however it’s pretty sobering to realize that $1.02 out of every $5.00 owed by a retailer is past due.  (BTW- this number represents about a 9% overall increase since December.)

What really jumps out at us are the manufacturing sector figures. 18% of trade debt owed by manufacturers is past due. That’s up from 16% just 3 months ago.  We typically see a cycle tied to how businesses; especially manufacturers, pay their debts.  It goes something like:

•    sales decline → payments slow down to preserve cash → hiring slows down (or layoffs occur)

So we’re expecting the cycle to work in reverse as the economy recovers:

•    sales increase → payments improve → hiring resumes

There are hints of improvement in the first phase of the cycle, such as last week’s announcement by the Commerce Department  of durable goods orders in April, but the continued slowing of manufacturing trade payments suggests that we still have some time before we see the effects of a recovery, if indeed that’s the direction we’re going.

Our May numbers will be out in about a week.  It will be interesting to see what the trend is doing.  We’ll post them here when available.