It’s official. We are excited to announce the first community-driven approach to commercial credit reporting. Business decision makers from small business owners to senior executives of large corporations can now leverage the collective insights of the entire credit community. Using familiar ratings and reviews features popularized on sites like Yelp, Amazon, and TripAdvisor, members can share payment experiences with other credit pros and business owners by writing their own reviews, while utilizing the knowledge of their peers when making credit decisions by reading reviews submitted by other users.

Our goal is to fill an information gap we’ve heard about since our founding over 15 years ago: business credit reports – used to determine credit viability and payment terms – are based on the financial transactions of less than 1% of US businesses. Over 50% of the US GDP is provided by companies that have little or no voice in how they are perceived in traditional credit reports – small businesses found on Main Street in every town in the country. In what amounts to a calculated compromise, these reports are often derived from interactions with only the largest businesses. The majority of interactions with small businesses are often ignored. It’s the all-too-often lost insights contained within those millions of experiences that Cortera aims to recapture by embracing a more social approach.

With this new solution we are simply revitalizing an approach that had been in place since the 1800s – local merchants exchanging trade references in communities throughout the country. And that’s the key. The Cortera Credit Exchange is a community platform, designed to take these traditionally offline communities and peer networks that have long contributed knowledge and experience for the greater good and bring them online — a technological evolution of one of the oldest and most trusted social networks in business history.

Our mission is straightforward. It is time for business decisions and control over the granting of credit that powers over 50% of US GDP to be returned to those that have been left behind: small businesses.

• Read the official press release here
• Watch us live at DEMO here
• Give it a try for yourself here

We are happy to announce that we have launched a simple and inexpensive subscription service that allows members to access a variety of our premium business information for a flat monthly fee. The new subscription service offers an even more convenient way of purchasing than before by offering users access to an unlimited number of business profiles all at the industry’s lowest prices. Of course, members can still access our free information on millions of businesses and buy our premium credit reports on a one off basis.

Three New Premium Subscription Plans:

Basic Plan: $29/month/user (subscribe to the Cortera Basic Plan)

• Month-to-month pricing (cancel any time)
• Unlimited searches and reports
• Business contact information (address, phone, website, map)
• Demographics (SIC, sales range, employee range, year founded, ownership, industry)
• Business Contact
• Parent Headquarters Name
• Payment Risk Rating (1 – 5 star rating on payment reliability)
• Payment Risk Summary (DBT, total balance, % current, % 90+ past due, total balance)

Expert Plan: $49/month/user (subscribe to the Cortera Expert Plan)

• Builds on the everything above in the Basic plan PLUS more
  • Payment risk score
  • Number of trade lines
  • Payment risk score trend graph
  • Supplier volume per year
  • Shipping spend per year
  • Spending level per year

Power Plan: $249/month/user (subscribe to the Cortera Power Plan)

• Builds on the everything above in the Expert plan PLUS more
  • Unlimited credit reports
  • Cortera risk segment
  • Monthly aging balances
  • Bankruptcy indicator
  • Family tax liens & civil judgments indicator
  • Commercial collections activity indicator

How does “free” sound? That’s right. Cortera is your source for free business credit reports on over 6 million companies. That might sound crazy, but we believe it’s time for you to have easier and less expensive access to business credit information so that you can make better business decisions. If you’re tired of expensive, long-term contracts to access credit reports from the Other Guy, you’ve come to the right place.

You’re probably thinking, “c’mon, there must be a catch.” There’s not. We’ve been compiling credit reports the same way the Other Guy does for more than 10 years. Thousands of customers rely on our credit reports every day to support their business risk management. They love the accuracy and ease-of-use of our credit reports. We think you will too.

So stop spending too much and getting frustrated by the Other Guy.  Start using Cortera’s free business credit reports instead.

The Other Guy’s Pricing is from the Dark Ages

The cost of collecting and distributing business information drops every year, yet the public continues to pay as if business credit data was still being gathered in the coffee houses and counting rooms of the 1860s. With the Other Guy, you get locked into “unlimited access” programs with complex pricing schemes that increase exponentially every year. You’re locked in so that their shareholders stay happy. What about your happiness? Why aren’t you reaping the savings from technology innovation?

You get those savings with Cortera. Start with our free business credit reports and upgrade to low-priced premium reports or nearly-free monthly subscriptions if you like what you see but need more information. And cancel any time you like. If you don’t like our products, we don’t deserve your business.

You Can Have High Quality at Inexpensive Prices

As a credit and collections technology innovator for the last 16+ years, we feel it is time for a change in the commercial credit reporting space. By listening to our highly active user community and delivering the solutions they really want, we have earned the respect and trust of some of the largest companies in the world. We’ve heard you loud and clear that you want better information at fair prices. So our mission is simple – we’ll continue to listen to your needs and deliver high quality information in return.

Getting Started is Easy

Visit www.cortera.com to start searching the 6 million free credit reports available today. The reports include business contact information, business demographics (revenue, number of employees, industry and more) and a payment rating. If you need more, we have a premium report that includes detailed payment behavior data, trade lines, and more for only $3.00. That’s a fraction of the price the Other Guy charges. We also have nearly-free monthly subscriptions for unlimited access.

Stay tuned. There’s more exciting stuff coming your way soon.

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.

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.

You might have noticed that we launched a new, satirical marketing campaign a couple of weeks ago to help bring attention to the important and increasingly difficult commercial accounts receivable management function. Now more than ever it is essential that organizations operate at peak performance across all levels of risk management, yet often times credit and collections functions are still viewed as back-office non-essential departments. Obviously this is not the case, especially in 2009.

In the world of “do more with less”, we hope that “Collectile Dysfunction” added some comic relief to your increasingly busy and often stressful day. Whether you love it or hate it, laughed out loud or think it is just another juvenile stunt to get attention, there is common ground among credit and collections pros that companies now more than ever need to keep pace with the current economic challenge. I’ve been on the road visiting customers throughout the spring and every company lists off a common set of stress points:

• Increased DSO and delinquencies
• Increasing internal reporting requirements for lenders, senior management and auditors
• Layoffs throughout the finance organization, especially analyst and collectors
• Reduced budgets
• More time in court because of customer bankruptcies
• Added work of analyzing partners and suppliers
• More analysis of private company financials
• Higher than usual friction with sales
• Collections challenges as entire portfolios are becoming more risky
• Surprises in the portfolio as good customers are going bad

We reported just this week that the national percent past due average now stands at 12.95% with 40 states worsening month over month. Clearly, despite some well publicized “signs of improvement” businesses are still struggling to pay their bills in timely manner stressing the entire cash conversion cycle. To make matters worse the aggregate amount of US commercial A/R debt over 90 days past due has grown 15.4% over the last four months. This is a concern given the fact that the later the payment, the more likely the supplier will not be able to collect.

While the Collectile Dysfunction or the CD Campaign is a tongue and cheek approach, the message is clear and well known by credit and collection professionals-many organizations need help and need help now to regain control over their portfolio. This is not a criticism, but simply the current reality and result of long-term company cultural norms that tend to focus on near-term sales goals with little attention to the risk of being ultimately paid for their products and services. As result the upfront risk assessment and ongoing management of the A/R portfolio tends to be underfunded and under staffed.

Do any of the following sound like your company?

• Sales & senior management overriding credit line decisions
• Orders being released off credit hold to make a shipping deadline or quarterly number
• Auto setup of “courtesy credit lines” without credit providing guidance or input
• Credit decisions based on “personal” relationships or history rather than factual analysis
• Requests for modern software and information falling to the bottom of the IT & budget priority list

Perhaps one of the positive outcomes of the credit crunch and recession is that senior management is now increasingly listening to their A/R leadership while in boom times perhaps they did not-hopefully in an effort to eliminate their “CD” for good.
We are passionate about bringing attention to the often overlooked trade receivables side of the struggling US economy. If the CD campaign helps draw attention to the issue and gets you the support and tools you need most, we’ve succeeded.

Tell us what you think.

My last post, posed the question: are predictive models still relevant in today’s economic climate? As expected it generated a fair amount of discussion both on and off the blog. Thank you for all of your comments. Let’s continue the dialogue.

A Quick Poll…

Scoring isn’t dead, but the type matters

In this market, it’s fair to be skeptical, but abandoning all forms of scoring completely would likely do more harm than good. Having some method of consistently evaluating and rank ordering customers remains the best, most efficient way to manage these relationships for both upfront credit decisioning and ongoing portfolio monitoring and collections activities. However, carefully choosing the type of model and conducting some near-term validation is certainly warranted. Based on discussions with a variety of credit and collections professionals, this market appears to be leaning toward a more point-in-time view of their prospects and current customers such as:

• financial statement-based scoring (for both public and private companies). Many reported more sharing of private financial statements than prior to the economic crisis.
• more judgmental, short-term payment history scores that focus on the current state of the business rather than trying to predict future payment behavior using models that may no longer be valid. Some of the comments from the last post landed on both sides of the debate on whether predictive models are experiencing “model drift” and under or over predicting risk or are these models holding up and still predicting accurately? (we welcome your continued comments on this debate)
• finding methods to compare internal payment behavior (how they pay me) with external data (how they pay others)

Get a complete view of your portfolio

We also heard from credit pros that they are increasing turning to a variety of information sources to get a better picture of how they are getting paid vs. their peers and then reporting this information back to senior management. This “better/worse” than the benchmark analysis can prove quite enlightening for those outside of the day-to-day credit and collections function. This can take many forms:

• comparing your own payment experience against an industry benchmark
• comparing your own payment experience against your credit group benchmark
• comparing your own payment experience against the broader market

Resources to help you guide your use of scoring into today’s economic climate

Trying to rate and analyze large volumes of both prospective and existing customers, scoring is still a must, especially as many companies have cut staff. Below are some helpful resources* that you can use to guide your assessment of the various options on the market today:

• Credit Today: Their Credit Scoring Central is probably one of the largest libraries on this topic in a user-friendly, “plain English” format that often includes case studies from credit professionals in many industries.
• Credit Research Foundation: An early leader and educator on the topic that offers a wealth of research papers and industry studies. The CRF also publishes a variety of publications as well as hosts industry events, seminars and best practice workshops that often cover various forms of scoring.
• NACM: Business Credit Magazine offers a Resource Library with past coverage of commercial credit scoring articles.
• Financial Insights: Dana Wiklund and an analyst with advisory firm, IDC recently published this video presentation: “Why Now Is The Time To Validate Your Models“

*Please note that some of these are available for a fee or subscription service.

Let’s keep the dialogue going

What are your thoughts on how scoring should be applied and what types of scoring you are using today?

This week I was in Manhattan Beach, California attending a Credit Research Foundation (CRF) Credit and Accounts Receivable Open Forum and an interesting debate broke out during the first day’s agenda: does predictive credit scoring still work? Can it be relied on given the current crisis?

In some ways, this was a surprising debate given that CRF members have been strong proponents of the use of scoring for commercial accounts. On the other hand it shouldn’t be that surprising given that we’ve seen serious debate and blame for some of the current mortgage mess on the use of consumer scoring models and that as leaders in the industry, the CRF members have been quick to recognize changes and adapt. A wide variety of vendors offer credit reports with predictive scores as well as custom models-these products have been a staple of our industry for years. The first two presentations of the conference focused on the state of the global credit crunch and set the stage for a group discussion with the two highly qualified guest speakers. With roughly 200 credit professionals in the conference room representing predominantly larger US organizations the group was eager to share. Both speakers did an excellent job of covering how we arrived in the current crises, what to expect going forward and offered opinions on whether the various stimulus efforts and bailouts would turn around the recession (and when). The host of the open forum then turned to the audience for questions and posed a simple question to get things started: how are you as commercial credit and collections professionals handling the credit crunch?

The first credit manager answered (roughly paraphrasing): “we are scoring every account to make sure we understand their risk going forward”. That’s when the panelists jumped in on scoring. Both heavily questioned the validity of the large debt rating agencies, the consumer FICO score and other predictive models (business or consumer) given the current economic cycle. The debate continued as various practitioners from the audience offered their opinions, as every vendor of the above-mentioned scoring solutions began to squirm in their seat. The group was split and many landed on both sides of the debate.

The debate: do commercial credit scores still predict the future?

It’s a fair question – given the rapid changes in our economy over the past year, can a statistically validated credit or collections score truly predict the future? Can a model based on the last 18 or more months of payment history still predict what is going to happen in the next 6 to 12 months or has the economy moved past the tolerances of the model? This is 2009; nothing seems to be predictable as even the best customers are turning delinquent and current models are suspect at best. Some may argue that by continuing to rely on these models that you are only digging a bigger hole for yourself with a false sense of security.

So, should we stop using scoring? Simply put, no. But there is no “one-sized, fit-all” answer here and I expect a heavy amount of debate in the coming months.

We look forward to your comments below.

A couple of weeks ago I discussed our annual customer conference and how companies are increasingly addressing the various challenges brought forward by our current global economic crises. Below is a quick recap:

1. Credit policies have more complexity and frequency of changes
2. The range of data sources and products continues to expand
3. “Do more with less” – expense reductions are causing changes to credit operations
4. There is an increasing demand for a view of total risk across the customer enterprise
5. Collections strategy assignment and design are getting more attention
6. Small businesses are under greater scrutiny
7. Customer monitoring is essential

So how can Cortera help?

#1 Review your credit policies and scorecards with one of our experts

We’ve seen credit polices both in terms of the complexity and the number of scorecards in use steadily increasing over the last several months. With the dramatic shifts in risk tolerance and overall industries impacted by the housing industry collapse, now is the time to review your policies and scorecards. We have experts with many years of experience that can help guide your review.

#2 Evaluate and use multiple information sources to save money and increase coverage

Cortera has been a leader in open access to a wide variety of business and consumer information providers for credit decisioning over the last 15 years. Multiple sources are better than one, it’s that simple. We have several documented customer success stories where clients have saved money while at the same time improving their hit rate. With over 20 sources to choose from ranging from global providers to niche industry-specific data now is the time to evaluate additional sources.

#3 “Do More with Less” with more automation and “information waterfalls”

As budgets are put under pressure companies are re-evaluating all aspects of the business looking for cost savings. Cortera customers have already realized solid ROIs though the use of business process automation, but also are increasingly benefiting from the use of what we call “information waterfalls” – through the decisioning process several data bureaus may be accessed to ensure coverage. The first bureau is often a lower cost pull before a more expensive report is accessed. This avoids wasteful bureau pulls when sufficient information is available from a lower cost provider. This same approach can select information based on the size of the credit request, geographic location, industry or small business/consumer. In all cases expensive reports can be avoided by utilizing just the information required for the decision.

#4 Gain a complete view to avoid unintentional exposures

Customers are increasingly looking for a complete view of their entire customer relationships. As companies expand globally, add product lines and acquire new business, managing a single view of the customer becomes more and more challenging. To that end we offer, Cortera LINK and Cortera TREE to identify parent/child relationships, link related corporate entities, help analyze total customer exposure and enable the credit department to allocate credit lines appropriately.

#5 Advance your collection techniques with technology and better information

Cortera offers the eCredit Collections platform to automate collection processes and activities to help you better prioritize and gain efficiencies. Looking to improve your results without software? Cortera recently launched Collections Insights. With Collections Insights you can upload a file of customers and within minutes receive insight on which customers are deteriorating and should be called first.

#6 Watch your small business customers

As consumers struggle with layoffs, less home equity and tighter lending standards pressure will increase on small businesses. Cortera offers access to a wide variety of business fraud, consumer and blended (business and owner) information to help you keep a watchful on eye on this segment of your portfolio.

#7 Monitor your entire customer base for warning signs

With a 41% increase in business bankruptcies over 2007, chances are you had a customer file in 2008. Cortera offers public record monitoring to keep you well informed as well batch portfolio scoring and analysis tools like BOOST to help you spot trends while you can still take preventive actions.

In this, hopefully once in a lifetime, economic climate we’re here to help you not only manage through, but also thrive.

Last week, many members of the Cortera team headed to Miami. No, we were not migrating south for the winter (tempting as it may be when the mercury is once again falling below 40 in New England). Even better, we hosted our annual Cortera Global Customer Conference. The event is an opportunity for our clients to come together from around the world to network, train, and learn from industry experts and each other.

As I reflect somewhat on the annual conference over the years, it is easy to get lost in the logistical details of organizing a wide array of training classes, keynotes, interactive sessions and networking events.

However one thing always shines through and that’s the community itself. This year was no exception. With a tough economy, write-offs and bankruptcy on the rise the group was as united as ever. Having just completed our sixth conference I wanted to step back and look at our goals when we first set out to create an annual global customer gathering:

1. Enable the community to provide unified product direction and consensus;
2. Facilitate the community of customers, partners, industry experts and employees to network and interact to form long-lasting business relationships;
3. Provide an environment dedicated to learning and peer sharing.

Six years ago the annual event started in modest form with product and company update presentations and a few round table sessions spread over a day and a half. In contrast, this past conference evolved into over 30 sessions with six unique tracks, featuring experts and customers often sharing the same stage and in-depth breakouts taking sharing to the next level. What is amazing to me is the genuine enthusiasm and ownership that our customers have shown toward this event.

What is also apparent is how this community and the credit and collections profession has evolved over this time. Here are a few of my observations from the conference. Feel free to comment and leave your thoughts below.

• Companies are leveraging new techniques, strategies and information to speed the collections process and improve cash flow. It was clear that in many cases through better models they were able to head off issues ahead of time as customer payment patterns deteriorated.
• Companies are increasingly looking at their entire organization holistically across product lines and geographic boundaries. Credit professionals are now at the forefront of owning customer exposure globally and linking business through various information sources. The concept of Master Data Management (MDM) has emerged as a catch phrase as organization struggle to gain a single source of the “the truth” when it comes to customer information that is often spread across many technology platforms.
• The changing economic climate continues to move the credit function into a more strategic role in the front office as write-offs and customer bankruptcies challenge the entire organization, not just the credit department. Businesses with strong balance sheets are now consulting with the credit leadership to use this crisis to potentially take market share as weaker competitors are forced to tighten credit line standards.
• Similarly as the economy pushes closer to an official recession, business fraud is on the rise and the credit function is on the front line of protecting the business. Throughout the conference this theme was consistent in many circles.
• Businesses are employing a more sophisticated approach to analyzing customers through multiple information sources and complex scoring models, much like financial institutions have leveraged for consumers over the last several decades.

These are just a sampling of what I heard through the many round tables and breakouts; feel free to voice your own comments on the conference.