Ultimate Strategy for Anticipating Credit Risk & Preventing Charge-offs
Discover the emerging game-changer that is taking the guessing out of credit management.
Unfortunately, the vast majority of the companies in the U.S. are privately held, so much of their most valuable business information is not disclosed.
How do you sort through prospective customers to determine creditworthiness and identify which customers are in financial retreat? Most credit managers are striving to make these tasks easier by:
If payment data isn’t enough, where are credit managers turning for deeper insights?
This revolutionary approach helps creditors identify the financial demise of a business in time to react and has drawn the interest of a number of savvy industry analysts.
Conventional payment data will always have its place, but the manner in which companies spend their money speaks even greater volumes about their priorities and direction.
The details and trends revealed in specific spending areas can tell you if a company is experiencing growth or decline, if it is expanding and adding personnel, or contracting and treading water financially. Learn why:
Bill Warmington, Analyst
Raymond James and AssociateS
To provide practical, sustainable value, credit managers and financial executives need a solution that incorporates all five essential characteristics:
How can credit departments incorporate purchasing behavior into their credit analysis?
B2B purchase behavior can be one of your most valuable corporate assets—a game-changer that dramatically improves risk management by providing visibility into the blind spots created by traditional credit management systems. It can also serve as a powerful new engine for revenue growth. The potential impact on your business includes:
1. Improve the predictive value of credit analysis
While payment history is a useful factor in defining a current or potential customer’s creditworthiness, purchasing behavior is a new breakthrough that offers up timely insights into businesses’ overall financial health. Purchasing data serves as a leading indicator, revealing hidden financial strengths or detecting troublesome financial trends months before they show up in credit and payment reports. Your credit managers can, for the first time, rapidly and confidently identify your most valuable customers and prospects.
2. Anticipate credit changes before payments are at risk
As a more complete financial barometer, purchasing insights provide creditors with increased visibility and earlier warnings of a business' financial decline. This empowers creditors to proactively take action ahead of a business' inability or failure to pay.
3. Enable a smarter, more effective allocation of resources
Credit analysis too often requires laborious searching through databases, web data, and other information. Purchasing data can improve the effectiveness of the two-way relationship between sales and finance, while also saving time for both functions. Sales gets deals approved better and faster, substantially streamlining the credit application process. Finance can also alert sales to up-sell opportunities with customers that deserve higher credit limits.
The impact on credit analysis, management, and beyond
We have spent years developing a comprehensive B2B purchase-based financial data platform, Moody's Analytics Pulse, to incorporate the five essential ingredients detailed above.
A vital dimension of Moody's Analytics Pulse is that credit departments can use it alongside their existing data provider. The platform offers free and a la carte priced capabilties, so users pay little to nothing to access critical insights on their customers.
Explore how Moody's Analytics cutting-edge platform offers the 5 essentials needed to analyze purchasing behavior :
What if a credit department's current data provider lacks the essential capabilities?
Does simply adding more data to your credit analysis process improve your understanding of companies’ financial health? If you’re amassing conventionally available business information,
the answer is almost certainly no.
We believe that this type of data will significantly improve a user’s ability to… model credit risk because purchase behavior is a better leading indicator of a company’s health than payment behavior…
The predictive power of B2B purchasing data adds a new dimension to credit analysis
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Our free AR monitoring platform monitors your entire portfolio and alerts you of any decline in spend across key categories.
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Subscribing to any number of information sources
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Foraging the internet for publicly available information
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Leveraging search applications to streamline information collection
The Problem
The Solution
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A vast, whole-market data set
Categorized purchasing information
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Ability to detail individual companies
03
Intuitive and actionable data presentation
05
The means to easily append customer records
A vast, whole-market data set
The creation of a massive volume of accurate company purchasing behavior information depends on securing data from a wide variety of reliable sources. This assures broad portfolio coverage including virtually all of your customers, prospects, suppliers and other companies of interest.
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Categorized purchasing information
This means segmenting B2B spend into meaningful categories, such as shipping and transportation, raw materials and business operations, as well as key subcategories. Not only is a company’s spend in each category important, but the relationship between spend categories provides a higher-order analytical insight; telling you what they’ll likely purchase in the future, as well as the trend of their general financial health.
This clearer, more complete picture is extremely valuable when making credit and risk-related decisions. The creation of a massive volume of accurate company purchasing behavior information depends on securing data from a wide variety of reliable sources. This assures broad portfolio coverage including virtually all of your customers, prospects, suppliers and other companies of interest.
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3. Intuitive and actionable data presentation
To be of significant value to credit professionals, B2B purchase data must be organized and presented in a form in which volumes of information can be received and understood in just a glance. Trends and scores must be brought into sharp focus to empower smarter, faster decisions.
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Ability to detail individual companies
The solution must offer a deep range of report options to enable users to easily drill into the purchase behavior details of individual customers, prospects and suppliers.
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The means to easily append customer records
The constantly updated purchase behavior data collected for individual companies must be easily integrated into existing databases and credit application processes. Users should find it easy to incorporate purchasing insights into business processes and systems through batch file appends and system-to-system XML interfaces. The new, expanded information should be easy to access whenever, wherever and however it’s needed.
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The Benefits
Increasingly, credit managers and financial executives are recognizing the limitations of conventional business credit evaluations based on historical payment habits.
Businesses with consistent creditworthy performance for years, steady historical payment habits, and no alarming public facing information are failing. Historical payment data is giving suppliers a false sense of confidence to extend credit and
leaving them surprised when the business fails.
Conventional B2B credit analysis is leaving businesses with blind spots.
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A vast whole-market data set
Powered by one of the largest databases of B2B credit information in North America.
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Categorized purchasing information
B2B transaction data is segmented into meaningful categories to draw deep purchase behavior insights.
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Intuitive and actionable data presentation
Key purchase behavior insights are modeled into scoring, so credit scores reflect a more accurate view of a business' financial health. Users recieve daily alerts of a decline in their customers credit score in time to act.
Moody's Analytics Pulse
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Materials Spend
A sudden decline in material purchases signals an anticipated drop in manufacturing volume, presumably due to declining orders or weak sales forecasts.
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Shipping Spend
A decline in shipping spend logically follows a reduction in manufacturing output, or weak sales, or both. Either way, it translates into reduced revenues.
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Operations Spend
Every business requires a broad range of products and services, from paper clips to computer maintenance, to support normal business operations. Significant reductions in operations spend signal a slowing of business, an effort to conserve cash, or both.
New Data
Biennial B2B TransactionS
$2 Trillion
PUBLIC RECORDS
100+ Million
Business Locations
36 Million
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Moody's Analytics Pulse
Moody's Analytics Pulse
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Ability to detail individual companies
The platform offers a broad array of intuitive reports to access detailed purchase behavior insights on individual businesses.
Moody's Analytics Pulse
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The means to easily append customer records
Batch file appends gather the latest purchase behavior data on entire AR portfolios, so users can easily input data into existing databases and credit application processes.
Moody's Analytics Pulse
Thanks to Moody's Analytics Pulse, companies can get a first-ever actionable view into B2B purchasing insights. This new information provides a more complete view that is simply unavailable with conventional credit reporting alone. Organizations can thus boost the effectiveness of credit analysis and management and make better, timelier decisions.
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