Credit Agencies- what do they really know?
We’ve all been in that position, you’ve been dealing with a customer for 4 or 5 years, you like them, and they have always been good. But recently they have started paying you at 60 days, and before it had always been 30. Something is not quite right…
Or that eager sales consultant rushes in, and you can see the pound signs in his eyes. There’s a new potential customer, they have just got gazillions of investment and they want to use you exclusively. Trouble is you know you are going to be exposed to them for a large amount of cash before they start paying. But it could be worth a fortune…
Usually you can go to Companies House and check out their data. But financial statements can be up to 21 months old, and newly incorporated companies will show nothing potentially for the first 21 months.
You could try the major credit agencies: like Experian, Equifax, and Dun & Bradstreet. We are always bombarded with stats and information, about their coverage, their AI, their analytical tools. But the problem at the SME and micro level is that each organisation is unique, they do not conform. A business can be flying high one month, and the next they are hurtling towards bankruptcy. And underpinning all the stats, AI and analytics is the reliance on financial data. 50-60% of UK companies file micro accounts. I have personally tried to glean information from these in the past. All I can say is that they always add up ok, but to not be able to distinguish debtors from cash or have any sort of breakdown of their creditor balance means that you have no real idea what assets they have and what money they owe. And they can be out of date by over a year.
Yet this is the raw data that credit agencies rely on. Credit scores derived from stale or incomplete data can lead businesses into financial and operational pitfalls—missed opportunities and strained negotiations as potential partners question the reliability of a seemingly adverse score. The ripple effect can disrupt trading dynamics, discouraging beneficial collaborations and investments.
Our aim here at GFTM is to address this enormous gaping hole in the SME and micro business ecosystem. The organisations who are best placed to make judgement on a customer’s ability to pay are the ones who are already dealing with that customer. Yet there is no way for potential suppliers (or investors) to access this data, let alone get the aggregated data from a load of suppliers to the customer.
In a world of cloud accounting there is the opportunity to get this data, and have an independent 3rd party gather it, assess it, and then provide a proper, up to date credit assessment on a customer. And the amount of data being collected in real time and the number of data points being created are ripe for analysis by AI and machine learning. Now that is a good use of it.
We are just starting off on our journey with GFTM, but fingers crossed we can make a difference and actually help those customers who deserve more credit, and protect those suppliers from throwing good money after bad.