March 29th, 2010 by Alex Coté
Over the last few weeks, I’ve had several conversations with credit pros in a variety of industries. And one of the running themes I’ve heard is a general lack of enthusiasm over the current state of business credit reports. “They are all the same”, “they are expensive for what you get” and “the information is stale” is the general tone. Not exactly ringing endorsements. Yet when I ask these same people whether or not they report their customer payment history to a commercial credit bureau, only 10-15% of them say yes. 10-15%! And what’s worse is that number is actually pretty good considering that roughly only 10,000 companies contribute trade experiences in the U.S. You see where this is going. Businesses want better coverage and better credit reports, and yet few are doing their part to fix the problem.
All of the major bureaus compile reports in the same way – voluntary submission of accounts receivable information from thousands of companies, on a monthly basis. Without these contributions, there wouldn’t be business credit reports as we know them today. This cooperation has yielded decent coverage, but we have a long way to go for the level of coverage we see with consumer credit reports.
Holding the full flow of info sharing back are internal policies on keeping information confidential, company culture, or even tactical reasons, like accounting systems that make it difficult to extract the information on a regular basis.
Data (Accounts Receivables or “Trade”) contribution programs have been around for decades. In the U.S. alone, thousands of businesses participate and benefit from such programs. Participation typically involves securely sending your accounts receivable to the bureau on a monthly basis. Trade contribution helps the provider and other creditors benefit from transparency in the marketplace through commercial credit reports. The more businesses that contribute trade payment experience information, the more likely that you will be able to identify customer payment issues early and proactively — and the better protected everyone is in the marketplace. The whole is indeed greater than the sum of the parts.
Contributing to credit bureaus by providing trade information helps improve accounts receivables performance. By sharing payment experience you are improving 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 the major credit bureaus, like (shameless plug) Cortera. It sounds simple, but most businesses take their reputations very seriously and will pay on time to avoid negative a credit rating. On the flip side, small businesses actually want you to report to help them build their credit report history.
Do you contribute to a commercial credit bureau? If not, we’d love to hear from you. In a future post I’ll answer many of the common questions people have about their contributions.
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[...] 5.) A simple tip that works: Contribute your accounts receivable information to the major credit bureaus (like Cortera) and you’ll get paid faster – it’s that simple. This post covers all the benefits: Why Contribute to a Business Credit Bureau? [...]