Credit Reports for Businesses Can Help You Avoid Collections

Ann Marie Smith

Mar 8, 2021

No business owner or manager enjoys the collections process. It is time-consuming, frustrating, and can harm business relationships. Yet, an essential part of managing your cash flow is ensuring that you get paid for the products or services you provide.

In a survey of small business owners, 69% said cash flow concerns — mainly due to managing receivables — was the problem that kept them up at night.

  • 34% of business owners said not getting paid by customers within agreed-upon terms had a significant negative impact on their business.
  • 66% of business owners said they were frustrated with the time it takes to process payments.

While customers have gotten a little better about making timely payments compared to when the pandemic first hit in early 2020, there are still a significant number of payments that are past due according to the National Summary of Domestic Trade Receivables report. The most recent report showed 88.31% of accounts receivable are current, which is good news. However, that means that more than 11% of bills are delinquent.

Credit Reports for Business

One of the best ways to prevent cash flow concerns (and get a better night’s sleep) is to run credit reports for businesses on your current customers. Reviewing a credit report for a business can provide valuable information about a customer’s financial health and help you determine your risk for avoiding collections.

If a customer’s business is showing signs of financial trouble or they are not paying their bills on time, a credit report — the business can give you an early warning so you can take steps to avoid collection problems. Credit reports for business also help you make better decisions about extending credit and credit terms to offer.

If you get into a collections situation, having this information helps you better understand how the company is dealing with other creditors and whether they are at risk of default.

The three main business credit reporting agencies provide different credit reports for business customers.

Dun & Bradstreet

Dun & Bradstreet (D&B), established in the 1840s, is the oldest provider of business reports. They provide:

  • Credit summaries
  • Credit risk scores
  • Financial stress scores
  • Payment trends versus similar businesses

D&B also provides a proprietary PAYDEX score. This is similar to the consumer FICO score, but it is only for businesses and helps you determine your customers’ credit risk.

Equifax

Equifax has been in the credit reports business since the late 1990s. While you get much of the same information as the D&B credit report for businesses, you also receive:

  • Public records search (bankruptcies, liens, judgments, UCC filings)
  • Business failure score
  • Payment history
  • Days beyond payment terms

Experian

Experian has been providing credit reports for business since the early 1990s. They also provide basic business information as well as their version of:

  • Risk indicator ratings
  • Risk alerts
  • Financial stability risk score
  • Repayment risk

These reports provide short summaries along with an overall credit score. You can also get a more in-depth credit report for a business if you need a deeper understanding of the factors that go into an individual business credit score. Your first step should be to compare Experian, Equifax, and Dun & Bradstreet credit reports.

Credit Reports for Small Businesses

Small businesses need to use credit reports to evaluate customers. Smaller businesses are more susceptible to fraud because they do not typically have accounting teams or a dedicated accounts receivable (A/R) staff watching over collections to flag problems. When collections occur in small businesses, it is often the owner or manager who has to do the follow-up, which takes time away from revenue-generating activities.

Today’s Uncertain Economic Environment

The pandemic changed the fortunes of many businesses. Some thrived by providing essential goods and services or by adapting to different conditions. Others, including previously healthy businesses, found themselves struggling. There are plenty of examples of businesses that had been doing just fine and were forced to close.

Many of your customers may have had a change of fortune. Even long-time customers that have paid on time may be struggling now. If you have substantial amounts of credit outstanding or have customers that represent a significant amount of your business, it is worth doing a credit check to avoid taking unnecessary risks.

Download Credit Reports for Business Instantly

Each of the business credit reporting agencies continuously updates information. So anytime you pull a credit report for a business, you will get the most current information. This does not mean you have to wait for the information to be compiled. When you go through accredit, you can select the report you want, fill in the business name, and download your report instantly.

Search and select credit reports for business from Dun & Bradstreet, Equifax, and Experian.