New Comprehensive Reporting legislation will add significant value to the assessment of the commercial risk of small businesses”, says Veda’s General Manager – Commercial Risk Products, Moses Samaha. Speaking at a recent Veda road show to more than 150 Trade Credit businesses, Samaha urged creditors to also assess the credit profile of the directors and proprietors behind a company or business to get the complete picture on risk.
“Trade payment data is a consistent lead indicator of risk, highlighting how businesses pay their suppliers. Veda analysis shows that in the six months leading up to a default, businesses paid their suppliers twice as late compared to businesses who did not default; and the number of days late increased by 50% in the six months leading up to the default compared to businesses who had no default, where there was no change” says Samaha.
“However, trade payment data is just one piece of the picture. Veda also encourages creditors to look at the people behind a business, as the credit behaviour of the people running the business can be a lead indicator of future risk. Comprehensive reporting will further enhance the accuracy of profiling. Better information means better decision-making.”