On the surface, the provider you choose for business credit reports might not seem like it matters. After all, you just need a reliable credit score, right? That way, you can quickly check each customer or supplier and make an assessment based on that.
Yeah, not exactly. And while a reliable credit score is definitely part of what you should be looking for, when it comes to a business credit report provider it’s just the tip of the iceberg. The right business credit report provider isn’t just about making yes or no credit decisions on new customers – things go a lot deeper than that. Let’s explore some of the key indicators that a business credit report provider will help you unlock more for your company.
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1. Your business credit report provider should have information on a wide range of businesses
It’s great if you’re using a business credit report provider who can give you information about domestic companies. But if you search for that exciting new customer opportunity and get hit with zero results, will you have to give up altogether?
Not with the right business credit report provider. The data your provider uses should come from multiple official sources, like government agencies, trade payment information and trade groups. If a particular business doesn’t appear in their database, they should be able to launch their own investigation to get you the information you need.
But what happens if your business expands internationally, or you start working with overseas manufacturers or suppliers? The same old domestic provider might not be up to the task. Plus, different countries have different credit scoring systems. How are you supposed to compare businesses in different countries if their credit ratings aren’t based on the same scale?
A good business credit report provider will use a universal, easy-to-understand rating system so that you’re always comparing apples to apples. That way, you never have to worry that you won’t be able to get the full picture of a business, whether that business is down the road or across the world.
2. Business credit reports should help you perform due diligence
Remember what we were just saying about expanding internationally? One of the most important things to remember when you deal with international supply chains is that compliance is your responsibility at every level of your supply chain. That means that every supplier you use, for example, needs to be on the up and up throughout their entire supply chain.
Even if you weren’t aware of any wrongdoing, a compliance violation at any point in your supply chain could hurt your business. We’re talking hefty fines, sure, but also the costs of legal fees and lost customers from reputational damage. OpenText’s research found that 88% of global consumers would choose to buy from companies with ethical sourcing structures in place over ones without. "Cancel culture” is about more than differing opinions: it’s an important decision factor amongst consumers that contributes to your bottom line.
And while it can seem like an impossible task to keep up with every link in your supply chain so closely, your business credit report provider should be able to help. When you pull a company’s business credit report, a good report provider should immediately alert you to any compliance issues, sanctions, red flags or legal filings you need to know about. That way, you can steer clear of the businesses that could pull you – and your reputation – down.
3. A good business credit report provider should help prevent fraud
It’s no secret that b2b fraud is on the rise. In fact, recent research has shown that 80% of US organizations were targeted by payment fraud last year. The number the year previous? 65%. That kind of growth is more than something to keep an eye on – it's a siren alerting you to a serious problem.
Payment fraud is one of the most common types of fraud businesses face every day. Criminals can send fraudulent invoices with slightly altered details, for example. Their hope is that you don’t have the information or knowledge to verify those payment details before sending money to them.
Verifying a company owner’s identity, as well as business details like addresses, phone numbers and banking information, is key every single time. You need to confirm those details before you sign contracts, send payments, or receive requests to change information from a business. And that’s exactly what a good business credit report provider will do. If you know you can trust the information you see in a company’s business credit report, you can help your business stop fraud long before it becomes a more urgent issue.
4. Your business credit reports should help reduce risk across your business
When you check a company’s business credit report, your goal is always to reduce risk. You don’t want to sign a risky customer, start working with a risky supplier, or introduce risk to your cash flow, after all! So when it comes time to choose your business credit report provider, you should be looking for the reports that help reduce risk at all of those levels of your business and more.
Good business credit reports should tell you:
- How likely a business is to declare bankruptcy: A credit score, or risk score, is the best indication of how likely it is for the business you’re looking at to still be operating in a year. A business listed as high-risk should be looked at differently – or potentially even denied altogether.
- How quickly (or slowly!) a company pays its bills: A company’s Days Beyond Terms (DBT) tells you the average amount of days a company pays invoices past their due date. A DBT of 7, for example, tells you you should expect to wait an extra week to receive payment. A consistently high DBT, or one that fluctuates wildly, could point to liquidity issues
- The payment experiences other companies have had with the business: trade payment data is an eye-opener when it comes to choosing who to work with. Your business credit report provider should source real payment experiences from customers and suppliers businesses have worked with. The more information you can get on customers, the easier it is to weed out risky customers before you work with them.
- Whether a business has had any negative media coverage or legal filings against it: A business currently in legal trouble could be spending extra money on lawyer fees and fines. Plus, businesses being negatively portrayed in the media could bring your own company’s reputation down with them.
No more surprises when it comes to customer creditworthiness.
Enjoy a free trial of Creditsafe's business credit reports.
About the Author
Bill James, Director, Enterprise Sales, Creditsafe
With over 15 years of experience in finance, risk management and data analytics, Bill James brings a high level of expertise and industry trust to his role. Before joining Creditsafe in 2021, he served as Area Vice President at Dun & Bradstreet. Bill is widely recognized for his authoritative insights into enterprise risk strategies and is a frequent, trusted speaker at major industry events. His development of tools like the DSO calculator further demonstrates his applied experience and leadership in driving financial performance improvements.
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