Naming and shaming bad debtors, CreditorWatch, naming a business.#Naming #a #business
Naming and shaming bad debtors
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Colin Porter started website CreditorWatch after becoming frustrated with late payers in his own business.
A website allowing small businesses to name and shame those who don’t pay their invoices is making it easier to weed out late payers before going into business with them.
CreditorWatch, which launched in January, allows businesses to list companies that don’t pay their bills. Small businesses can search the site and receive alerts when a business is listed on the site as having defaulted on a payment.
It’s a timely tool given Dun & Bradstreet figures released last week, which show the number of businesses with outstanding debts rising. According to its figures, the number of businesses with severely delinquent accounts – that is, accounts that have not been paid more than 90 days after their due date – increased by more than 7 per cent during the December quarter.
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Dun & Bradstreet’s data also shows Australian firms took on average 52.1 days to settle their accounts during the December quarter, or more than three weeks beyond the standard 30-day payment terms.
CreditorWatch’s founder, Colin Porter, says he set up the site after becoming frustrated at constantly having to chase bad debts in his own small business, a custom publishing house.
“Since we launched in January we’ve had thousands of members sign up and hundreds of businesses registered for not paying their debts,” explains Porter. “I’ve even been told by some of the banks that they see our site as an early warning system for potential bank defaults.”
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Businesses that want to register non-paying companies with CreditorWatch need to provide evidence such as a final notice that a bill has not been paid.
“Every document we receive related to a bad debt is reviewed by our team,” Porter says.
Although Porter says none of the businesses listed on the site have so far been in touch to contest the claim, those who believe they have been unfairly named can contact CreditorWatch, which will investigate the situation. A business that is registered on the site for non-payment of debts remains on its bad debtors’ list for five years.
Dun & Bradstreet, however, believes firms need more than just selective data on who may or may not have paid their bills. The credit reporting agency holds more than 10 million trade references on its Australian database and believes SMEs need up-to-date data that can identify customers who are at risk of paying late, or not at all, rather than default data that looks backwards.
“To be useful credit information must be fresh, independently verified and able to predict future behaviour,” says Dun & Bradstreet’s Damian Karmelich, director of marketing and corporate affairs.
“Relying on self-reported default data essentially tells you what may have happened six months ago. What’s more important is fresh data that alerts you to upcoming risk,” says Karmelich.
Gary Green, head of sales for global debtor finance specialist Bibby Financial Services, says payment times have reduced slightly since mid-2010 when businesses were taking on average 57 days to pay their bills.
“Businesses are now paying their bills closer to the longer-term average,” he says.
But a more worrying trend, says Green, is the increasing rate of failure of small businesses. According to Dun & Bradstreet’s figures, business failures increased by 23 per cent in 2010.
“Businesses tried hard to survive during the financial crisis but they are now starting to grow again and are issuing more invoices, but this increases their risk of not getting paid,” he says.
Green urges small businesses to keep on top of their invoicing, invoice regularly and “keep close to your customers” to ensure bills are paid in full and on time.
He says once a bill is more than 90 days overdue it’s time to get more serious about chasing payments by either issuing a letter through a solicitor or using a debt collection service.