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Think Credit Reports Are Too Expensive to Use as an Ongoing Due Diligence Tool? Think Again

posted on 2015-05-06 by Matthew Debbage, Creditsafe U.S.A.

A business credit report is most often used by credit and collections professionals at the beginning of a new client relationship to determine a company’s risk level before issuing a line of trade credit. But after that their usage tends to dwindle, largely because of the notion that obtaining reliable credit data is too expensive.

SunGard Corporate Liquidity’s Credit & Collections Global Benchmarking Study found a huge disparity in how much money companies spend on credit bureau data, based on their budget. According to the study, in 2014, 26 percent of companies with over $1 billion in revenue spent more than $150,000 annually on credit bureau data, while 29 percent of companies with under $1 billion in revenue spent less than $25,000 annually on credit bureau data. As you can see, the decision to purchase business credit data might appear to be contingent on a company’s financial wherewithal.

What’s unfortunate about this approach is that to get the most out of credit reports, they need to be used as an ongoing risk management tool, allowing you to spot any changes to your customer’s risk profile or payment behaviors and take action before they become a bigger issue. For instance, a credit monitoring service can provide regular alerts about any significant or sudden changes to a company’s financial status or credit health before the problem spirals into a bigger one, such as its credit rating, credit limit, payment behaviors, directors or legal filings.

Now for the silver lining. Credit reports have become more affordable in recent times, making it possible for businesses of all sizes to get more use out of them than they once could. Here are the primary factors driving down the costs:

-          The Internet – The delivery of credit reports via the Internet has made access for businesses more affordable by reducing or eliminating paper trails and speeding up the process of obtaining reports.

-          Flexible, subscription-based pricing models – Typically, a company would have to spend hundreds of dollars to get just one individual business credit report on a customer. Doing this quickly adds up. But now companies can sign-up for a subscription-based credit reporting service, allowing them to view credit reports on all of their customers, as often as needed.

-          De-monopolization – For decades, companies that needed reliable business credit information would have to turn to one of the big bureaus to obtain it, like Dun & Bradstreet or Equifax. But, this is quickly changing as more credit reporting bureaus are arriving on the scene to give American businesses more options, availability and pricing.

For these reasons, business credit reports are no longer just reserved for large companies with big pockets. If cost has held you back in the past from utilizing credit reports as a regular part of your risk management strategy, it doesn’t have to anymore.

About the Author

Matthew Debbage is the president of Creditsafe’s U.S. operations, overseeing the company’s expansion into the U.S. market. Creditsafe is the world’s most-used supplier of online company credit reports. Nearly 5,000 companies in the U.S. use its credit reports, ranging from small businesses to large, global concerns like Staples, Ryder and Nestle. Debbage, with more than 15 years of experience in market entry strategies, has successfully led the research, planning and launch of a number of operations in markets around the world, making companies more efficient and profitable.


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