Credit Management CreditorWatch Data
5 mins read

Trade payments data: Why is it so important?

Imagine if you could look into a crystal ball, see into the future and know whether your trading partners were going to pay you on timeWhile it can’t 100% guarantee outcomes, trade payments data is as close to a crystal ball as you can get when it comes to credit control and looking into the health of a business’s bank account. 

Trade payments data definition

Trade payments data is real-time data that shows you historic businesstobusiness transactions and payment behaviour. It is a reliable indicator of whether a business typically pays its bills promptly or if it tends to pay late. It can also give you an insight into whether a business is tightening its belt.

How is trade payments data derived

Trade payments data collection comes straight from the source. CreditorWatch is a key Australian provider of trade payments data. We have extensive and, in many cases, exclusive data sources for our trade payment data that’s available to support informed credit risk decisions. CreditorWatch trade payment data is derived from two key data sources:  

  • Exclusive SME trade payment data from accounting software integrations  
  • 11 million trade lines of data from aged trial balance uploads.  

Essentially, trade payments data is an exchange. Your business shares your own trade payments data, and in return you get access to the extremely valuable trade payments data of thousands of other businesses so you can make better credit risk decisions and minimise your financial risk.  

Why is trade payments data important?

Using trade payments data helps you minimise financial risk and maximise cash flow. Trade payments data can reveal a lot about the financial situation of a business, its intentions when dealing with you and your relationship with it. It should be considered a non-negotiable tool of any good credit control process.  

Breaking it down, trade payments data has five key benefits to businesses looking to minimise their financial risk.  

ONE: Providing data to make more informed credit risk decisions 

When onboarding a new customer, deciding what credit terms should be extended to them can be a crucial step in protecting your cash flow. Reviewing trade payments data before deciding on credit terms to offer is an easy defence against potential late payment and cash flow issues down the track. Reviewing a prospective customer’s trade payments data will give you insight into whether they typically pay suppliers promptly or whether they regularly fall in the late payers’ bucket. From this knowledge, you will be able to decide whether your standard credit terms can be extended to them or whether it’s more appropriate to offer cash on delivery until you can see improvements in the way they pay suppliers.  

TWO: Revealing early warning signs that a customer could be in trouble 

Once you are trading with a customer you aren’t guaranteed their financial situation will remain stable. Ongoing monitoring of customers’ financial and operating situation is crucial in being first to know when things are deteriorating. Not all changes are bad, and this should be considered as you monitor financial activity. Points to monitor include:  

  • A continued, new trend of late payments when they used to pay on time.  
  • Smaller or less frequent orders  
  • Making payments on time, but not in full  
  • Payment behaviour that is significantly worse than the industry average  

THREE: Highlighting customer behaviour that warrants further investigation 

Sometimes customers can do puzzling things. Sometimes they’re trying to (not so subtly) send you a message. Sometimes they’re doing the opposite and trying to hide something. Whatever the situation the following behaviour spotted through trade payments data should raise a flag:  

  • A change in how they pay you, for example they consistently paid on time and now they’re paying late (or the opposite).  
  • The timeliness of how they pay you is worse than how they pay other suppliers  
  • Their payment behaviour is significantly worse than the industry benchmark  
  • A change in their regular order with you. For example, they’re consistently ordering less from you or more time is passing between their regular orders. Or the opposite and there’s a consistent trend of larger and more regular orders.  

Why should this sort of behaviour raise flags? Well, if they’ve turned their payment behaviour around and have now been paying you consistently on time (perhaps coupled with increasing order sizes or doing more business across the board) then maybe it’s time to reassess their credit terms. If they’re on cash on delivery, maybe you can strengthen your relationship and start offering trade credit.   

On the other hand, if they use to be an all-star customer and are now appearing on you overdues list it might be worth a phone call. Sometimes these situations are caused by a change in staff or someone on holiday. Other times, it can be a first indication that the customer is unhappy with the goods and services supplied. It may mean there’s a dispute on the cards. In any case, the only way to speed up payment in these instances is to investigate further – pick up the phone, have a chat, dive into the detail.  

FOUR: Reducing the risk of engaging with a fraudulent customer

Reviewing trade payments data prior to onboarding and agreeing credit terms with a new customer is an important step in minimising your risk of being a victim of B2B fraud. Establishing that a prospective customer has an active payments history and good payment behaviour should give you confidence that you’re dealing with a business in good faith.   

FIVE: Increasing trust in your business 

If you’re a new business or small business chances are you’re out there hustling. All your hard work though can be curtailed if suppliers and service providers you’re trying to trade with aren’t sure whether to trust you or not. This is where signing up to a commercial credit bureau and sharing your own trade payments data can be advantageous.  

By sharing your own trade payments data, prospective suppliers and customers will be able to review your history and have confidence in your ability and willingness to pay.   

Get in touch today!

Looking to minimise your financial risk and have more confidence in who you trade with? Or are you getting frustrated with overdues and customers avoiding you come month end?

Get in touch with the team at CreditorWatch to find out how trade payments data could slot into your credit management process.

credit management data small business SMEs trade credit risk trade payment data
Account Executive
Ryan joined CreditorWatch in January 2021. He has more than eight years’ experience working with technology businesses, empowering them to make smart decisions through unique, data driven, insights. He is passionate about assisting businesses in mitigating debtor and supplier financial related risks. With a client base across all industries, he specialises in the construction, manufacturing and logistics industries.
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