A credit profile reflects specific detail on who owns and leads a business, how it operates, and how well it is performing.
A profile may include financial information and/or trading and pay practice experiences shared by customers, vendors, and service providers.
It may also include details from credit card companies, banks, and other financial institutions. A limited or mismanaged credit profile, intentionally or unintentionally, can and generally will limit opportunities.
Companies that do not share or update the necessary facts about their business, whether it be ownership related or not submitting financial information in a timely manner or at all, will raise questions and concerns for industry partners.
A lack of information will often result in changes within a business relationship, or perhaps one that is never realized.
“Those who extend credit,” notes Bill Zentner, vice president of rating services for Blue Book Services, “pay close attention to financial performance; they want to know a buyer has assets and can pay its obligations.”
Pay performance, an extension of financial performance, is closely watched by credit extenders.
“Getting paid is important, but it’s not enough to ‘just’ get paid,” Zentner says. “It must be timely and meet the expectations of vendors to instill confidence in the business relationship—no one has time, and it costs money to chase slow pay.”
Thus, financial and pay performance, components of any business credit profile, are the bedrock for ratings and scores.
Ratings, which speak to historical performance, provide a baseline for what to expect from a particular business relationship, while scores predict the likelihood of a negative credit event within a 12-month period of time.
“When we’re evaluating new customers,” says John Harris, president of Paradigm Fresh, Inc. BB #:295982 of Fort Morgan, CO. “I like to see a XXX C rating and a score above 700. We won’t sell them 20 truckloads at a time, but we will do some trading.”
Harris also acknowledges that Paradigm Fresh’s credit profile has helped his business. “It gives people confidence in who they’re doing business with; it’s a snapshot of who I am, our company, and our reliability.”
Like financial information, a company’s business relationships are pivotal to its credit profile. It’s crucial to ensure credit profiles are accurate and offer a full portrait of a business and its trading partners, whether new or established, large or small. If not evaluated and updated frequently, a credit profile, rating, and score can suffer.
“Sharing current trade vendors and other business partners, and annually reviewing and updating this information continues to be an essential step every company should take to enhance its profile,” confirms Dan Steeve, an analyst and team leader at Blue Book Services.
This is a multi-part Credit and Finance feature adapted from the October 2019 issue of Produce Blueprints.