To make matters worse, Company A’s ratings reflected that they were an average of 11 days past due in paying creditors. This would be worrisome to managers and directors of these larger organizations and companies, and may give pause to continuing to pursue Company A as a viable vendor.
As I dug deeper, it became clear that over 97% of Company A’s trade references had not even reported their favorable relationship and Company A’s exceptional prompt payment history. In fact, Company A, whose revenues easily exceeded $20 million for the past several years, and we in short order learned the Company A was having its DNB score adversely impacted by 5 trade creditors who collectively comprised less than .02% of Company A’s business. We promptly challenged the negative reports and I was able to research the DNB numbers for over 100 trade references that we could input into the company’s credit reporting detail. These actions accomplished two things. First, it demonstrated the financial capacity of this entity and second it diluted the impact of a trade creditor adversely reporting on a specific payment experience. In a nut shell, the company’s credit score has improved dramatically. Not only did the credit score dramatically improve, but also we were able to add a great deal more detail without divulging sensitive financial information. For example, we were able to include some of the assets owned by the company along with the fact that the company generates in excess of $20 million in annual revenues.
This process can take a couple of months so planning ahead of time and being proactive is critical, particularly if you are in the process of seeking work from larger companies, the Federal government or responding to any sort of request seeking proposals. Additional variables comprising the DNB ratings score provide more “predictive” information based on the industry, but the key is the PAYDEX score, which is based on a Company’s actual performance.
One other point is many companies do not think to ask for a trade creditors’ duns numbers when they are seeking to do business with them. Including that information on the front end of the trade creditors data collection will enable Company A to readily access and maintain needed information for reporting purposes.
The DNB rating is not a snap shot. It is dynamic and will fluctuate based on the latest reporting provided to DNB. Encouraging appropriate and continuous record keeping will be essential to sustaining a positive credit rating once you achieve that status.
DNB ratings and comprehensive financial reports are also usually requested as a key part of RFP responses and can play a critical role in third party validation or bolstering the financial credibility of a privately held company. Having worked as a director in government, I can certainly appreciate the need and would encourage companies looking to balance their interest in preserving their financial privacy while accurately depicting their financial strengths, stability and projections.
Managers in these large institutions need as much third party validation because when they recommend or do business with a company they too put their credibility on the line. We are available to assist with promptly assessing and preparing an action plan to address a company’s financial and legal information in addition to improving and maintaining a company’s credit score. Please call 313.468.4932.