Data sharing: using business payment performance information

In February 2012, a new set of rules were announced for businesses with an annual turnover of less than £632,000, allowing them to choose, if any, what financial information they disclose. With the loss of this basic information, what can be done to ensure that you can still make the right decision when it comes to extending credit or setting up new customers or suppliers? The answer is simple – share your payment experiences.

Data sharing is now at the forefront for many organisations. Changes in payment performance has become one of the earliest signals of possible financial difficulty and represents one of the most predictive indicators of the likelihood of business failure before the filing of official documentation.
So it’s vital that you blend Companies House data (which can be anything up to 21 months old) with more in-depth sources that include real time trade payment performance information.

As well as your own payment experiences, information can then be gathered on how potential or existing customers are paying other suppliers. For those businesses showing positive behaviour this will open up the opportunity to trade with potentially good customers earlier, increasing profits for both.

For those experiencing late payments this will highlight un-communicated queries and separate the businesses which appear to be in genuine financial difficulty from those that can pay but won’t. It’s all done anonymously, so you can ensure that the information that you are providing is fully confidential.

Cultural acceptance
We’ve already seen a great deal of interest from businesses, especially at the top end of the SME market, as they fight for the funds they are owed to ensure they can pay their own staff and suppliers, and invest for growth.

In regards to legislation the Government already allows businesses to share information on limited and public limited companies as standard. You are also data protection approved in regards to sharing with concerning sole traders and other forms of business as long as members include the ‘Right to share data with credit reference agencies’ within their terms and conditions of sale.

Value of joining a trade payment scheme
Sharing sales ledger data is a painless and cost free arrangement, which can assist in effective and successful credit and collections management. Participating members are regularly placed higher in the priority order for payment by their customers as poor payment behaviour potentially damages the business credit worthiness and can seriously affect their supply chain.

Reliability of Data
In order to become a supplier of this data a rigorous vetting process is undertaken. Once completed, a contract is signed whereby the contributor agrees to supply us with factual and accurate ledger data. Every month, on receipt of ledger information, EBE put all the data through an internal validity check. This will highlight any potential abnormalities such as an account balance changing dramatically and the volume of credit notes on file. We’ll then contact the contributor to check the data is correct.