Businesses are currently paying their bills fast in part because they are confident they will continue to get paid equally fast by their existing customers. However, they don’t appear to be investing aggressively because of mixed economic news and fears over another recession. Overall a conservative, wait and see approach to their working capital management.

A three year view of the Cortera Supply Chain Index and other industry data and figures are available on Cortera’s Market Trends website.

Media Inquiries: please contact Alex Coté at 857-403-1370.

The Cortera Risk Data and Reporting Solution is designed to assist companies of all sizes and industries in gaining new insights into a business. As part of this integration with SAP BusinessObjects Spend Performance Management customers will have access to Cortera’s wide array of information on businesses. The integration allows customers to leverage their investments in solutions from both SAP and Cortera® for a clearer view of their suppliers and customers. Cortera Risk Data and Reporting leverage both traditional and new types of data and are centered on an innovative approach to technology that ensures better and fresher data is available for businesses to assess their suppliers in real time. The combination of robust data and powerful analytics allows businesses to be smarter about their supplier risk and then take the appropriate action.

As part of the agreement between Cortera and SAP, both companies will share technology and product roadmaps.

Read the official announcement here.

• Significant changes in Cortera Payment Report (Cortera CPR™) risk scores
• Financial and operational news, covering over 10,000 publications
• Growth clues, signs a business is expanding
• Bankruptcy filings
• Tax liens and civil judgments

“We only endorse companies that we truly feel represent the best of the best for our members, said Dirk Van Dongen, President, National Association of Wholesaler-Distributors. “Having personally worked with Cortera over the last several months and watched their solutions in action at NAW member companies I fully recommend their suite of business information products. For any distributor looking for better insights about their customers and suppliers, Cortera should be their first stop.”

Read the official press release here.

As we look back on the Cortera SCI over the last few years it correlates nicely with both the ISM’s Purchasing Managers Index and NACM’s Credit Managers Index—as both indices started contracting in late 2008 (below 50 on the scale), US businesses also began to slow their invoice payments to their suppliers. In 2009 and 2010 as both the PMI and CMI began to improve and show economic expansion, the SCI also began to improve as businesses became more confident in future sales and made more timely payments to their suppliers.

The June 2010 ISM Manufacturing Report on Business also showed healthy numbers with the eleventh consecutive month of expansion in manufacturing activity. However, it’s not all positive news as the ISM index dropped from 59.7 in May to 56.2 in June. Readings above 50 indicate an expansion; below 50, a contraction. One area to watch is the new orders component of the ISM index – it dropped from 58.5 to 65.7. While still in expansion territory this could indicate a more moderate pace in the second half of 2010. The Commerce Department also reported today that demand for durable goods dropped 1 percent in June—another sign that the recovery may be losing steam. We’ll be watching the SCI closely for any signs of weakness.

If you haven’t been following our previous posts on the subject, let’s take a quick step back and explain how and why we believe such data might be connected. Our monthly SCI tracks the payment activities of 350,000 manufacturers, distributors, wholesalers, retailers, services, and transportation companies. Historically, the months leading up to the holidays (October, November) have shown a spike in late payments, as businesses ramped production and took on increased inventory – along with related near-term debt. Predictably, payment rates speed up and return to normal in January as cash flows through the entire supply chain.

But 2009 presented a very different picture. First, the arrival of *the spike* in slowing payments occurred earlier than expected. Then, equally unexpectedly, the speeding of payments and cash flow typical of a January return started to occur during the height of the season. As we noted then, one possible explanation was that the numbers simply supported what most retailers were reporting in the media: the 2009 inventory strategy would be to cautiously stock shelves early with little expectation for replenishment once those supplies were exhausted. In other words, a cautious inventory and production strategy would ensure that retailers and suppliers weren’t left holding the bag, as had been the case in 2008.

Did the supply chain just conclude a happy and healthy holiday season? That question remains unanswered, if only temporarily. What is promising, although irregular, is that flow of cash through the supply chain seems to be beating the historical odds.

The latest Institute of Supply Management manufacturing index fell to 53.6 this month, but is still above the critical 50 level meaning more firms are growing than contracting. Within this data it is important to note that inventory portion of the index dropped in October meaning that businesses efficiently sold their inventories. This is obviously a good sign as we continue into the holiday season. Going forward, we are going to closely watch to see what our December numbers show. It is certainly possible that we’ll see another spike upward as businesses replenish their reduced inventories for a second wave of holiday shopping and again delay payments like in our October report. If not, shoppers may see more empty shelves and less post-holiday sales than in the past as more retailers conservatively manage their inventories tightly, following the painful lessons of 2008.

Are we seeing the impact on the supply chain of low inventory, early promotion strategy – frontloading the holiday shopping cycle? Or will we see the impact of a new wait-and-see approach to gauging shoppers’ unpredictable confidence and comfort level? December should go a long way toward answering those questions.

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.