However, we usually see this cycle of jumps in DBT in November and December—this year we are two months early. The question is why the early move? We could be seeing the impact of big businesses using their market weight and strong cash position to push out payments. Given this growing cash hoard by large companies, the movement in the SCI could be showing a fading confidence in the recovery. Or we could be seeing the effects of tight credit markets for small businesses forcing them to manage their cash flow by slowing payments to their suppliers to make it through the holiday season.

With a mix of news hitting every day it is fair to say the economy is trying to find a steady course. The most recently released October 2009 Manufacturing ISM Report On Business supports the case of economic recovery as manufacturers – the early stage supply chain stakeholders — have increased output ahead of the holiday season and appear to be more confident in consumer spending. Yet today’s bankruptcy of CIT and concerns about consumer spending argue that we are in for a longer recovery. The next few months of data will bring further clarity.

A few highlights from this month’s SCI data:

• Comparing the September 2007 (6.8 days) numbers to the September 2009 (9.56 days) numbers and you’ll see that the Supply Chain Index is ~40% higher
• Commercial accounts receivable debt greater than 30 days past due is also 50% higher than September 2007
• We’ll be watching closely to see if the 2009/2010 holiday season matches past cycles, with DBT quickly dropping back to pre-holiday levels

Cortera’s Supply Chain Index (SCI) measures the relative health of this flow of cash to suppliers. The most recent Cortera SCI figures indicate that, while there remains more payment friction than a year ago, confidence in sales may be starting to return to more normal levels. A few trends continue from our last report in the September analysis of business accounts receivable data through August 2009:

• The amount of late A/R is decreasing. In August, the amount of A/R in the SCI more than 30 days past due fell to 10.05%, approaching levels not seen since October of 2008, an improvement of nearly 23% from its peak level in December 2008. This represents nine straight months 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.
• Late A/R, now standing at 20.9%, has also flattened out and is hovering in the ~21-23% range over the same nine month period—well off the December 2008 high of 27.1%, and nearly in line with the pre-October 2008 run up.
• With the SCI Days Beyond Terms (DBT) now standing at 8.56, on a year-over-year basis, DBT has worsened by nearly 15%. Still, with nine months of improvement behind us and a drop of by over 20% since the December 2008 peak it is clear that cash flow is improving and confidence growing.

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.