As part of our latest SME Business Resilience blog series, we look at one of the ways that businesses of all sizes can actively improve their access to finance on good terms – Payment Performance.
To dig into what Payment Performance is and how it can help, I spoke to Stephen Barry – Data Partnerships Manager. Before that though, here’s a quick overview of Payment Performance.
What is Payment Performance?
Payment Performance (PP) is a data sharing scheme that enables businesses to share their list of commercial customers and the debts owed by them with Experian. This is then combined with data from other members of the scheme to help ensure that business credit scores are as accurate as possible. This helps businesses offer trade credit on appropriate terms – reducing risk across the economy. Benefits of joining the Experian Payment Performance scheme, include receiving a detailed ‘days beyond term’ analysis of their customers, to help them prioritise their collections strategy.
Digging into the detail
I, Paul Malyon (PM) spoke with Stephen Barry (SB) – Data Partnerships Manager – to understand more about Payment Performance (PP) and how it has become even more important during the Covid-19 pandemic.
PM: Hi Stephen! Thanks for putting the time aside to speak with me and explain more about the importance of Payment Performance data and how it can benefit businesses, especially during the current situation. So, let’s start with a simple question – Why should businesses share their data?
SB: At a macro level, we all want to encourage prompt payment and so sharing data on how well your customers pay their invoices helps other businesses know who the poor payers are, set suitable terms and drive prompt payment.
At a data sharer level Experian provide some free of charge benefits for sharing data. We provide Experian branded messages to use on invoices as part of the collection process. We provide a detailed Days Beyond Terms report on your portfolio so you can see how your customers pay other suppliers and if you are an Experian client you can gain access to more predictive scores using finance data.
PM: Thanks for that overview. The scheme is pretty clear but how does PP impact loan application success?
SB: By keeping up to date with payments to existing suppliers, both finance and trade credit, that positive behaviour is reported to Experian and is reflected within your Credit Score. This then increases the likelihood of a successful trade credit or loan application with future suppliers.
PM: That makes sense. So with the current challenges in mind, will paying on time help with an application for CBILS?
SB: CBILs like other commercial loans still need to go through a diligent decision-making process to ensure responsible lending although the Government are encouraging lenders to be generous as the government is underwriting the loans. So, a good payment history will help with any loan application.
PM: For everyone reading who’s not yet a member, how can companies join the scheme?
SB: We have a designated team of Data Partnership Managers who will assist you on the journey of contributing your datawhich includes a range of data checks to ensure your customers’ payment data is being interpreted accurately and fairly. For any questions or enquiries please e-mail firstname.lastname@example.org.
PM: So once a company joins, how can they use it to improve cash flow?
SB: In return for your sales ledger submission, Experian will provide you with a detailed “days beyond terms” report containing your customers’ details along with the days taken to pay your company compared to the collective Experian days score and recent trends. Customers with a track record of consistent or increasing slow payment practices can be tackled earlier and managed appropriately. The report will also highlight potential bad debtors at the earliest possible opportunity, giving you the option to act and reduce the risk exposure. The report will also show positive payment behaviour, freeing up controllers’ time from contacting customers who are likely to pay on or near terms with or without contact.
PM: One question on how businesses reading this can help protect and improve their score even when incomes are being challenged. Will part-paying impact a business’s credit score?
SB: Potentially yes. If only part-payment is made to clearing a debt, and the remaining debt is not in dispute, the outstanding balance will be reported by your supplier as being overdue and could impact your credit score.
PM: Finally, how can a business see their credit score?
SB: If you are a limited business director then the easiest way is to use Experian’s My Business Profile and currently the free trial period has been extended to 3 months to help businesses through these challenging times.
PM: Thanks Stephen! That’s really useful.
Protecting your business
As you’ve hopefully seen, Payment Performance is a great way to help improve access to finance. With access to funding more critical than ever, it’s clear that paying bills on time can help. Plus, by sharing data, you can ‘pay it forward’ and help other businesses access the best funding sources for them.