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Businesses fail to protect themselves from late payers

23 May 2011

Businesses are failing to make use of publicly available data that could protect their business from poor payers, according to new figures from the Institute of Credit Management (ICM).

A survey of Members found that a quarter (24.7%) of those questioned do not use the payment performance data provided in B2B credit reference reports – despite the vital help it could provide in helping them avoid poor risk.

But nearly two thirds (63%) of businesses were guilty too of not sharing payment performance data on their B2B clients with Credit Reference Agencies – the very information that three quarters of them (75.3%) rely on to make informed credit decisions.

While the economy is still reeling from the effects of the recent downturn, Philip King, Chief Executive of the ICM says it is puzzling why businesses are 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 says.

Philip says it is especially disappointing how few share payment data: “It’s the very information they complain they never have, and yet they do little to help themselves,” he says. “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 – a founding member of the business information providers association (BIPA) – says that whilst 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their credit risk exposure, their checks often only make use of annually filed data – which can be significantly out of date: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 says, “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% found the information of limited or no use at all to them, 32% said it was useful and only 16% said the information was invaluable.

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About

The Institute of Credit Management (ICM) is Europe’s largest credit management organisation, and the second largest globally. The trusted leader in expertise for all credit matters, it represents the profession across trade, consumer and export credit, and all credit-related services. Formed over 70 years ago, it is the only such organisation accredited by Ofqual and it offers a comprehensive range of services and bespoke solutions for the credit professional (www.cicm.com) as well as services and advice for the wider business community (http://www.creditmanagement.org.uk/), including the acclaimed ICM/BIS Managing Cashflow guides.