New online service aims to highlight bad payment habits; MOVE COULD HELP SMALL FIRMS SECURE CREDIT DEALS.
BETTER information on companies' payment habits could be available online helping small businesses secure credit, a South Wales company claims.
Creditsafe, based in Caerphilly, is offering subscribers the opportunity to upload information on how quickly their customers pay invoices, via a simple online process.
The new online solution will increase the breadth and depth of datasets held on individual companies' payment habits, providing Creditsafe's customers with even more information on which to base their credit decisions, the company says.
The solution allows Creditsafe's 28,000 customers to share insights based on actual payment experiences, highlighting bad payers and promoting best practice.
Creditsafe aims to own the largest single database of payment data in Europe by 2013 and the largest in each individual European country by 2014.
While larger companies' payment experiences are routinely used in payment data, that of SMEs operating at the end of the supply chain is not captured.
Companies often find they are basing business-critical decisions on a limited profile of information, such as data extrapolated from a customer's utility bill payment record alone.
According to Creditsafe, its approach means that company credit data is more readily available.
This gives suppliers more information on which to base a lending decision, making them more likely to extend trade credit to a customer that has a good track-record of regular and timely payment, the company claims.
Creditsafe has already gathered trade payment data on more than one million companies, based on 20 million experiences, and it hopes to collect data on another 12 million invoices before the end of the year.
It plans to reach this target with the help of its 3D Ledger product, which was launched earlier this year.
For larger companies, 3D Ledger can be plugged into standard accounting software and then automatically pull in the relevant payment data if subscribers choose to share it.
Creditsafe has introduced its initiative at a time when the European Commission has proposed that micro-entities (companies with an annual turnover of less than PS1m) are excluded from financial reporting altogether, which would reduce the amount of publicly available financial data.
Creditsafe says its database will be able to fill the gap left if these micro-SMEs are precluded from having to file accounts by law.
It will do this by providing payment experience data, which acts as good indicators of creditworthy companies.
The company already uses a number of sources to build a better idea of a company's likelihood of entering insolvency. For example, subscribers can see data on companies that are linked to their customers via international group structures, as well as getting information on overseas directors.
However, payment data remains one of the most effective indicators of a company's likelihood to pay in the future and gives subscribers an insight into their customers' payment habits.
Chief executive Cato Syversen said: "We've already collected billions of pounds worth of invoicing data, which we're confident will be the most comprehensive in Europe.
"By using third-party data, we are effectively creating a bulk trade reference from a variety of suppliers. This allows one customer to learn from another's experience with a client, whether it's positive or negative. "A further benefit is that companies can communicate the fact that they will share payment experiences with 28,000 Creditsafe customers - which should encourage them to pay their bills more quickly.
"SMEs are way down the payment chain and unless their payment experiences are made available to suppliers then companies risk being overlooked for credit.
"The fact that we automatically collect payment experiences that are based on hard numbers, not just subjective reviews, actually increases the likelihood that smaller companies will be able to secure goods and services on credit.
Mr Syversen added: "Late payment has a disastrous effect on cash-flow so it's vital for the long-term success of small and large businesses alike that payments are made on time.
"We're aiming to use the 'wisdom of crowds' to help build a picture of which companies are good payers and which should be avoided. This picture will get clearer as the number of experiences we collect grows."
Cato Syversen, chief executive of Creditsafe
PICTURE: Richard Swingler (c)