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How credit scores help businesses manage the impacts of Omicron

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CreditorWatch RiskScore helps businesses manage the impacts of the pandemic 

The flow-on impacts from the spread of the Omicron variant have brought many small businesses to their knees. Supply chain disruptions, skills shortages and rising costs hit SMEs when they were just beginning to recover from the initial outbreak of COVID-19.

At a time when it’s never been more critical for businesses to have confidence in their trading relationships, CreditorWatch’s RiskScore provides businesses with financial support, trustworthy and transparent insights into their trading partners’ creditworthiness.

This feature enables creditors to understand a business’s probability of default over the next 12 months, protecting them against the increasing number of Australian companies making delayed payments. This is a key indicator of business cash flow problems, with CreditorWatch’s latest Business Risk Index data showing that defaults were up 15 per cent for the three months to January 2022 against the same quarter last year.

The COVID-19 pandemic has diminished many of the traditional indicators of creditworthiness found in financial services. Banks have been permitting firms to defer payments, the government support of JobKeeper created artificial market liquidity, while creditors were cutting customers some slack on late payments. This made the threat of onboarding badly performing customers even greater. As the banks and ATO resume their regular collection activities, businesses that have been art.

Industry leading credit score 

The Business Credit Score was built in partnership with Open Analytics and uses sophisticated machine learning to analyse 11 million tradelines. The model is the most predictive and insightful risk score in the market. It ranks entities based on their riskiness with one of 14 credit ratings (from A1 to F) and a numerical score from 0-850. The higher the score, the lower risk the entity poses.

While other models use a limited range of indicators to predict default, CreditorWatch’s Business Credit Score reports and analyses factors such as trade payment data and business demographic and geographic risk to rank entities based on their riskiness. This company credit check provides a transparent and reliable score for business owners to see the likelihood of failure of potential partners, plotted against the industry average.

Patrick Coghlan, CEO, CreditorWatch says: “Traditional credit scoring methods are simply inadequate and for many firms, onboarding one failing business can have a massive impact on their livelihood. CreditorWatch’s Business Credit Score has unique access to public and private data sources, including tradeline behavioural data, text mining and business demographic risk factors, to provide insights that can’t be found by any other credit bureau. As our national economic picture continues to become ever more complicated as our social image is affected by continued coronavirus and specifically the new variant, the CreditorWatch Company Credit checks will ensure great businesses are not taken down by failing customers.” 

James O’Donnell, founder, Open Analytics says: “A really important component of Business Credit Check is CreditorWatch’s trade payment data. This encompasses business-to-business transactions, including information about trading volumes and late payments behaviour, which is very predictive information when it comes to future defaults. It’s never seen before in the industry and has revolutionised the traditional credit scoring process.”

For more information, access the CreditorWatch white paper here and RiskScore brochure here.