Many large Australian retailers have been forced to shut their doors over the past two years. These devastating flow-on effects have been felt by all stakeholders in the supply chain. For wholesalers, who are often operating on narrowing margins to begin with, the volatility of the market since March 2020 has driven home the need to be aware of the credit history of each customer.
A credit check is a great first defence against financial risk and the best way to get a snapshot of your customer’s financial health at any given point in time. However, credit checks alone aren’t enough to detect risk and avoid bad debt. To protect your business long term, a more holistic, proactive strategy is needed. This is where the advanced RiskScore and monitoring and alerts tools from CreditorWatch can help.
Why wholesalers are at risk
Wholesalers understand the important, often delicate business of maintaining cash flow. A huge amount of your capital is tied up in inventory, and you rely on timely payments from your retail-business customers to pay your debts, acquire more product, and pay for overheads like staff salaries and property rental.
You will also need a certain amount of buffer to deal with seasonal shortages and unexpected market fluctuations, and hopefully have something left over to invest in growing your business.
Late payments from customers can cause ongoing cash flow problems that mean many wholesalers are always just one step ahead. Under normal circumstances, this is stressful and time-consuming, but when things don’t go to plan, it also means that you are far less able to deal with a larger, unexpected blow to your bottom line. If one of your customers suddenly hits financial white water, you could find yourself suddenly holding a large volume of goods supplied on credit.
Understand the credit rating of your customers
Most wholesalers are well aware of the financial risks involved in their line of business, and they know the benefits of conducting a credit check before extending a line of credit. But a wholesaler may have dozens of regular customers and keeping track of the credit rating and financial health of every one of them is no easy task.
There is also the issue of understanding the credit rating system itself. There are more than different commercial credit bureaus currently operating in Australia, each with their own database and credit rating system. The credit rating issued by any one of these bureaus may be nothing more than a number, with little context and no explanation of how it was calculated.
When they receive a business credit score with so little supporting information, many business owners are left with more questions than answers: What does my credit rating actually mean? What is a good credit score? How accurate is it? It’s little wonder that some choose to skip this process altogether.
At CreditorWatch, we are committed to providing you with accurate, predictive, data-driven credit checks. We believe that in order to make the best business decisions, you need the whole picture. Our systems prioritise transparency; when we provide you with a risk score for a business, we will tell you exactly what that means, how it was calculated, and where we got our information from. Drawing on over 11 million trade lines and a customer base of 55,000+ companies, a credit check from CreditorWatch delivers the most reliable and accurate credit rating Australia has to offer.
Protect your business and mitigate credit risk
Our credit reports are created using RiskScore, Australia’s most predictive credit rating. RiskScore ranks businesses according to the level of risk they pose to creditors and predicts the likelihood of that business defaulting in the next 12 months.
A RiskScore credit rating is based on unique and extensive data sets. This includes traditional risk-indicators, like payment defaults and court actions, that are used by credit bureaus around Australia. However, we are the only credit bureau in Australia to gather payment data directly from small businesses, and the first in the world to offer one-click integration with Xero and MYOB.
Monitoring and Alerts
As accurate as a credit rating might be, it is still possible for a business to take a sharp, unexpected turn for the worse. This is why we offer ongoing credit monitoring and alerts, with real-time notifications that keep you updated with any changes to your debtors’ financial health and potential ability to make payments.
PPSRLogic is another CreditorWatch tool that helps businesses safeguard their assets. The Personal Properties Securities Register (PPSR) allows businesses to maintain title over their property when a customer goes into liquidation, but many businesses fail to register or renew their listing. PPSRLogic uses automated features to simplify the registration process, saving time and improving accuracy.
Every business owner knows that some level of credit risk is inevitable, but wholesale distribution does not need to be a high-risk operation. Having access to the best information puts you in the position to make strategic, informed decisions that benefit your business. Get in touch today to learn more about how CreditorWatch can give your business the advantage.