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CreditorWatch Payment Rating

It’s as easy as ABCDE

On 1 July 2021, CreditorWatch launched Payment Rating – our latest product designed to shed light on slow-paying businesses. The new tool scans business-to-business transactions to measure the time it takes companies to pay their suppliers’ invoices. This gives CreditorWatch customers invaluable insight into their clients’ propensity to pay on time, or at all.

Effective 1 July 2021, our payment ratings are assigned based on a business’ dollar weighted average arrears position over the previous 12 months for business-to-business trade payments monitored by CreditorWatch.

CreditorWatch sources trade payments behaviour from two data sources:

  1. Accounting software integration data is sourced from small to medium businesses; and
  2. Aged Trial Balance (ATB) payments system data is sourced from large corporates.

Technical improvements have been made to enhance existing calculations by filtering down to continuously active data suppliers and other logic included to filter out any invoices where there is any ambiguity regarding payment time and/or payment terms.

Previous calculations were based on different methods and formulas and should not be compared to the current figures. Please get in touch should you require further clarification or if you would like information about calculations.

Here’s how it works

Payment Rating helps creditors understand their clients’ payment reliability based on their past behaviour, using a simple ABCDE rating scale. It complements RiskScore; CreditorWatch’s industry-first credit score and rating system launched in 2020. The two products work in tandem to give customers an accurate indicator of credit and payment risk.

Deciphering the ABCDE rating

It’s simple to understand a business’s payment behaviour with our ABCDE rating system. The rating framework is as follows:

How does Payment Rating complement RiskScore?

RiskScore is designed to predict the likelihood of a business becoming insolvent in the next 12 months. It uses a statistical model rating system powered by various data factors, like business demographic risk.

Payment Rating doesn’t predict but rather measures the likelihood of the company being paid on time. It’s intended to be used in conjunction with RiskScore for a more holistic view of an entity’s risk.

The benefits of Payment Rating

Payment Rating helps businesses make more informed payment decisions, like limiting credit amounts or asking for cash on demand.

For creditors and financial services, it can be used as an early warning indicator in credit scoring, credit decisioning and annual reviews of customer credit ratings. A low score such as a D or E can be used as a trigger for a full credit assessment.

For more information on Payment Rating, visit https://creditorwatch.com.au/features/payment-predictor/ or speak to your account manager.