Businesses are failing to make use of publicly available data that could protect them from poor payers, according to figures from the Institute of Credit Management (ICM). A survey of ICM members found that a quarter of those questioned do not use the payment performance data provided in B2B credit reference reports – despite the help it could provide in avoiding poor risk.
But nearly two thirds of businesses did not share payment performance data on their B2B clients with Credit Reference Agencies (CRAs), which the ICM says is the very information that many of them rely on to make informed credit decisions.
Philip King, chief executive of the ICM, said it was puzzling why businesses were not engaging more with CRAs.
“If you don’t know the complete financial picture of the business you are trading with, how can you correctly asses the risks involved?” he said.
He added that it was especially disappointing how few shared payment data.
“It’s the very information they complain they never have, and yet they do little to help themselves,” he said.
“You would expect both positive and negative information to be passed on so other businesses can benefit from the agencies reports. Instead, it just builds up a confused picture of many businesses finances and can result in more companies not getting paid.”
Andy Craven of the business information and risk management solutions provider D&B UK, which is a founding member of the business information providers association, says that while businesses understand the importance of monitoring their credit risk exposure, their checks often only make use of annually filed data, which can be significantly out of date.
“Monthly payments data will provide far more meaningful intelligence,” he said.
“Provided that credit managers can distil the key relevant data from the plethora of updates they receive. This will give them an insight, for example, into negative payment trends over a sustained period that might indicate a more serious credit problem.”
The survey also showed a mixed response to the usefulness of payment performance data in assessing credit risk for businesses. Around 35 per cent found the information of limited or no use at all to them, 32 per cent said it was useful and only 16 per cent said the information was invaluable.