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Managing credit rating

As a private company, there is no need or desire to publish financial statements and so third party vendors often use D&B to obtain credit reports. In the companies I have worked for we always had sufficient cash to pay our bills and made a point of paying one a month invoices like cleaning, alarm, pest, etc within a few days of receipt of vendor invoice, and mutiple transaction vendors like fedex, components, etc within a few days of the end of the month. We showed, and had negligable payables, and our policy was to maintain an impeccable credit rating because (a) it was all third parties could judge us on, and (ii) we did not have a lot of expense and purchase beyond our payroll, and so it simplified our accounting life to keep everything current.
 I was always shocked to find my D&B report showed absolute and trend data that were considerably worse then we could imagine or explain, and even though I knew my vendors well enough to call and ask if they had a problem, I was never able to find the source of bad credit reports.
In talking to D&B they would never disclose the source of adverse credit and recommended a subscription to their monitoring service which still didnt provide any detail information.
Is anyone else out there surprised or cynical about the accuracy of their D&B and paydex scores as they relate to their own company and expectations? Do you think they are accurate and timely, or could they be created from scant data just for the sake of having data available on every company regardless. Is it more important to them to have some data than accurate data?
And has anyone managed to get D&B to explain or correct incorrect ratings?  I would like to get a wide spread of input on this topic!

Thanks for your comments.
 

Answers

Jeff Taylor
Title: CFO
Company: Communications Co.
(CFO, Communications Co.) |

I completely agree. It's like the Free Credit Reports doc com guys who are getting the heck sued out of them for running a "free" credit report scam. I think D&B does this to get you on their service, plain and simple. Pretty frustrating for a small company.

Mark Stokes
Title: CFO
Company: Private
(CFO, Private) |

I think you might be reading a bit too much into this. They do what they can with the data they get, which is certainly limited for smaller companies. It's not so much a conspiracy theory as it is plain old statistics.

M.J. Becker
Title: Treasurer
Company: 3D Systems Corporation
(Treasurer, 3D Systems Corporation) |

Can anyone recommend alternatives to Dun & Bradstreet? Many of our customers are smaller, private companies, so we rely on D&B to help us with the credit decision. I am concerned that we are getting taken to the cleaners on pricing, but do not have any objective evidence to evaluate whether or not we are being gouged. We run 400-600 D&B's annually, about 10% of which are international, the remainder domestic U.S.

Mandy Ng
Title: Accountant
Company: in-between
(Accountant, in-between) |

Experian has data on personal credit rating.

Robert Becerril
Title: Controller
Company: Belami
(Controller, Belami) |

I work in a small company as well. One of the things I have learned is that not matter how well you keep current on payables, you will never be the highest rating...unless you have $1MM in equity or more. It's a criteria that many don't think about.

Fred Dempster
Title: Principal
Company: DemTat dba RMA
(Principal, DemTat dba RMA) |

Simon - - Not seeing an answer - I could agree with Mark Stokes (stats and low reporting) but if your payments are all on time or early, even the low reporting would be/should be good.

It has been years, but in my Credit Management days, D&B on smaller firms was of little use as much data is estimated and pooled. Our process was the traditional credit application with three trades and a bank, and we would call the three trades for payment history and mail out the bank request. Even if the three trades provided were the best or only ones the prospect customer paid on time, it proved they had the ability to pay and were paying. The rest is credit risk classification (higher risk for smaller new customers) and diligent follow up on any past due. Plus for any new customer we would by phone verify through the process of where our invoices should go, their process, and the contact names and numbers - very customer service, but very proactive.

So finally, having what Simon outlined in a format that can be shared with others (confidentially) is one suggestion. This would be for opening new trade and/or bank purposes.

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

Fred, I agree that information in D&B may not be perfect, and that it is a good idea to seek out your own references on prospective cusomers. This represents a positive verification of facts. However it is not possible to anticipate which vendors may be using D&B to pull credit status on our company since we dont know who, when, or why a vendor is checking. Our best defense is to subscribe to the D&B self monitoring service so we can see our rasting and monitior changes, but we are still not able to know why or as a result of what payment experiences, our rating may be downgraded. Given the assumptions and errors often found in the general background section of the D&B report, I would not be surprised to see the same errors and assumptions being made whan it comes to payment status. And since the word of D&B is the highest authority for covering a credit decision, they cant afford for anyone to prove them wrong and find credit mistakes, hence their refusal to identify late payment reporters!

Fred Dempster
Title: Principal
Company: DemTat dba RMA
(Principal, DemTat dba RMA) |

Agree, my note is an add-on to that. Unless things have changed, D&B offers price reductions for those using D&B reports if they share their trade experience. I always find it interesting that for personal credit one can pinpoint where information is coming from and take corrective action, yet not for D&B. NACM.org is another cource of information,with education and industry credit groups, and business credit reports.

David Cole
Title: CPA, CVA, CRFAC, CGMA
Company: Haines, Isenbarger & Skiba LLC
(CPA, CVA, CRFAC, CGMA, Haines, Isenbarger & Skiba LLC) |

and we found that there was bad information being reported to D&B that once they followed up with the submitter got removed from our account. It's a shame they wouldn't do anything without us buying the service first, but it wasn't that expensive either.

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

David, How did you get D&B to (i) accept that there was an error, and (ii) identify it for their own purpose without identifying the vendor to you. Since we dont have access to the names of the "late reporting" creditors we cant identify who the candidates are for errors!

David Cole
Title: CPA, CVA, CRFAC, CGMA
Company: Haines, Isenbarger & Skiba LLC
(CPA, CVA, CRFAC, CGMA, Haines, Isenbarger & Skiba LLC) |

of the information because it was a very large amount that continually showed up on our report. The balance never changed. We knew our vendor base well and had pretty much concluded from talking with a couple of them that they never reported to D&B. Based on the balance being reported and the fact that our only two vendors that could have been reporting it claimed that they weren't to us, D&B agreed to contact the reporting entity. They found that it wasn't our balance and was being reported against us in error. It is a slow and painstaking process, but if you stick with it you can get results.

Fred Dempster
Title: Principal
Company: DemTat dba RMA
(Principal, DemTat dba RMA) |

D&B does have the reported data that comes in and points to your, anyones, file, and they can check for errors and corrections. Years ago when I prepped data for D&B I had to manually correct or surpress any negative reporting that was not the customers fault - like cash posting errors or past due on an agreed payment plan. Not sure how this type of activity is done today. I've a call into a friend at D&B... see if I get anywhere.

Jack Ormberget
Title: CFO
Company: Color Star Growers of Texas, Inc.
(CFO, Color Star Growers of Texas, Inc.) |

We too are working through similar issues and finding the process is not favorable to privately-held companies. We do not wish to publish our financial data, and apparently will suffer for the right. Add in the fact that we are rolling up operating entities into a parent(holding), we have complicated the process even more. D&B won't give the "new" parent company a rating, even though it is comprised of D&B rated subsidiaries. We are having to go back to all our credit vendors and establish facilities for each operating entity as we will be doing business with them and through each. D&B's monitoring service is only good for one D&B number, so in our case, we would be purchasing 5 total. Which although still fairly nominal, seems a bit like "getting squeezed" by "The Family." I would like to see some sort of Sherman Act inquiry.

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