By Greg Plunkett
In today’s COVID environment, many businesses are suffering. If your company extends credit to other businesses, it is more important than ever to use business credit reports when determining whether or not to extend credit. It’s the best way for you to make fast decisions without making bad decisions and it gives you the most reliable information available.
A business credit report highlights information contributing to a company’s risk potential, identifies strengths and vulnerabilities and offers in-depth details on its financial activities.
What follows are the key components of a business credit report and how they can help you make better, more profitable decisions.
Identifying information – This data includes important information such as the primary business name, address, inquiry match details, unique business ID and Ultimate Parent name for businesses that are part of a corporate hierarchy. Phone number, URL and Tax ID Number are also provided, when available. With this information, you can determine how long the company has been in business and verify the company’s business location.
Risk dashboard – The elements included here highlight datapoints that are related to risk including payment history, public record activity and even possible fraudulent activity.
- You can see how a company pays its bills as compared to other businesses in its industry.
- The payment history shows you how the company has paid invoices within the past six to 12 months – very valuable information when determining how much credit to extend.
- Public records will showcase any bankruptcies, tax liens or judgment filings against the company which are clues to a company experiencing financial distress.
- You can also see if a company is in collections with any accounts which may indicate its inability or unwillingness to repay debts. If a company has filed for bankruptcy, you will want to avoid extending credit as that may allow others to supersede your claim to their assets.
- The business category enables you to identify whether the data contributor is a primary or secondary supplier and compare the business’ payment habits across the industry.
- Terms set by other vendors can also be seen which allows you to see if the business pays others on time and is a way to determine what credit terms to set.
Fraud checks – A business credit report also screens for potential indicators of recent fraud. It checks against potential listings on the OFAC warning list, whether the business has been a previous victim of fraud or if there are any inconsistencies with the company name, phone number, address or Tax ID Number. Armed with this information, you can be confident in the legitimacy of the company and how it operates.
Credit risk score – This score predicts the likelihood of the company going seriously delinquent or bankrupt within the next year. With highly predictive risk scores you are better positioned to make a fast and accurate assessment of risk.
Financial stability score – Obtain a clear understanding of a company’s likelihood of financial stability risk within the next 12 months. It even determines the percentage of businesses that are riskier and more likely to have financial issues compared with your customer.
Just imagine having all the information you need to confidently reduce risk and identify emerging growth opportunities – right at your fingertips. With a business credit report, it can happen. It offers companies that extends credit an exceptional level of customer information that enables you to conduct business with greater confidence. These reports offer a snapshot overview as well as detailed data that relates to business payment performance, public record history and company backgrounds. They allow you easily and accurately determine the creditworthiness of a business and make sound decisions that will improve your ROI and mitigate risk.
Author: Greg Plunkett, Director, Business Information Services at Credit Plus, Inc., a leading provider of business data. He can be reached at gplunkett@creditplus.com.
