New partner a credit to CRN's web offering

Graydon's checking facility is designed to help resellers avoid bad debt and late payment.

A fear of losing large sums of money through bad debt or late payment should be enough to convince any business of the value of pre-sales credit checking.

Yet, according to channel credit specialist Graydon, few resellers have recognised the value of such a service.

Martin Williams, managing director of Graydon, claimed that it is not so much unwillingness on the part of the reseller, but more to do with accessibility of credit checking services and ease of use.

He believes that resellers need to be shown the benefits of a credit-checking service and must understand the risks.

These risks can be fatal to a business. Department of Trade and Industry (DTI) research estimates that of the 40,000 businesses that fail each year, a quarter do so as a result of late payments.

Of course there are provisions in the Late Payment Act that enable businesses to charge interest on this and, if necessary, take further action to retrieve the money more quickly. But what about bad debt?

Williams's view is that resellers should try to minimise this risk by doing their research beforehand. A little preventative medicine should be easier to swallow, he believes, and he is almost certainly right.

This is why Computer Reseller News has teamed up with Graydon to offer resellers a simple-to-use credit-checking facility as part of its Online Services, found at crn.services.co.uk.

"The online tools and services are intended to help resellers increase productivity and manage risk," said Paul Briggs, editor of CRN.

"There have been a lot of cases of fraud in the channel over the past year, so to help resellers beat this we have teamed up with Graydon, a well respected channel-friendly credit information firm.

"It offers the kind of services that give resellers peace of mind. It is an excellent addition to our Online Services portfolio that was always intended to help resellers find deals quicker and do business more efficiently with less risk."

The process is simple: type in the name of the company and click on the 'search' button. This will give you basic information about the company in question. If you want to find out more, such as payment history, credit scores and risk assessment, then you will need to get out your plastic and pay.

The databases glean their basic company information from Companies House registers. It is important to realise here that Companies House just collates data and does not analyse it. The analysis bit is the job of credit agencies such as Graydon.

Williams believes that, in the IT sector, the need for constant credit checking and payment analysis is crucial.

"The computer trade is a volatile business," he said. "There is and always has been a risk element attached to the sector."

In the early days, much of the attention was on vendors and distributors, but it quickly dawned on the company that the whole trade, resellers included, could benefit from credit information.

The company decided to set up its ChannelFocus unit to provide specialist guidance and intelligence to help customers in the trade avoid bad debt where possible.

Williams claimed that there are a number of avenues where resellers can get burned. He said fraudulent companies are an increasing worry at this level because they have been forced down the distribution chain.

The reason for this is that higher up the chain, at vendor and distributor level, there are now more sophisticated measures to prevent fraud.

These measures have been built up over time, mainly in response to direct attacks from fraudulent companies and in conjunction with Graydon's own services.

"We can spot fraud," said Williams. "We can build up patterns of companies by tracking their credit history and payment records. We have been working with a number of distributors since 1995 with great success."

There are also companies that may be suffering from cashflow problems themselves and so hold on to money longer than they should.

This tends to ring a few alarm bells and, although it may not prevent a reseller or distributor doing business with that particular company, at least they are aware of the potential risks.

This may apply to new customers but also to existing customers. After all, companies change and so do their cashflow and payment tendencies.

"Resellers are now the targets of fraudulent businesses because larger companies and distributors are employing more sophisticated measures of preventing and detecting fraud, but perhaps one of the biggest problems of bad debt is with existing customers," said Williams.

If trust has been built up over time with regular customers, resellers may feel reluctant to start losing regular business in the hope that things may change again.

It is a fair point and one that most businesses have to contend with. At least with credit checking, a sound assessment of the risks can be made.

Graydon conducts its tracking and analysis through its tools, such as ePatrol and CreditScan.

The latter matches customer databases against Graydon's credit scoring databases, while the former provides companies with a 24-hour tool to monitor customer portfolios.

It also has other services, including Trade Payment Data that tracks customer payment habits, and a risk monitoring service called CreditWatch.

The idea, according to Williams, is to offer customers a range of services to meet as many needs as possible. For resellers, Williams believes there is plenty of scope in its services and plenty of reasons for them to be taken up.

Checking the credit rating and payment history of companies after all is one sure way to ease cashflow worries.

Think of it as an early warning system. If one of your customers starts to avoid paying its bills, you may want to rethink your business relationship with that company. If you are entering into a deal with a renowned bad payer, you may want to run away.

Whatever you do, at least you will be making an informed decision and not an off-the-cuff one. And that has to be good for business.

WHAT IS CREDITLINE DIRECT?

As part of CRN's Online Services section, Creditline Direct enables resellers to get credit information on companies quickly and easily, even if it is just a one-off enquiry.

The service offers the following:

• Access to credit reports on more than four million UK-registered companies and non-incorporated businesses;
• Dynamically and daily updated information from Graydon;
• 24-hour availability, allowing you to access credit reports whenever you need to.

If you are trading worldwide, whether you are exporting or importing, it is also worthwhile to know the risk of your potential or existing customers or partners abroad. Credit checks on more than 30 million companies worldwide are now available instantly online.

Basic company information is available for free, but for a report on credit and payment details, a charge of £10.90 plus VAT for a UK company report and £28 plus VAT for other countries is applied.

WHAT IS CREDIT SCORING?

Graydon employs two scoring marks. One is through a scoring suite of products called Augur, developed with US-based scoring specialist Fair Isaac, and the other is its own Graydon credit rating, a more traditional method of scoring that gives a rating depending on the answers to a set of questions.

Augur is designed to improve decision making on UK customers by providing up-to-date, accurate, relevant scores for all types of businesses.

The score predicts, in terms of odds, the likelihood of the business experiencing financial stress and its ability to survive as a business in the next 12 months.

The Augur score is engineered differently from the Graydon credit rating and as such it provides you with more granularity (the scores range from 190 to 550).

Using the Augur scores, commercial credit grantors can reserve manual reviews for accounts in the middle range, and deal automatically with high-risk and low-risk accounts.

WHAT IS GRAYDON?

Graydon is one of the leading European service providers in credit management and database business information. Owned by European credit insurance agencies Gerling NCM, Coface and Hermes, Graydon provides specialist knowledge and services in the IT industry.

It draws on UK and European company databases and contains information about more than 30 million individual companies. The output provides customers with comprehensive, up-to-date, analysed information delivered online, via email or fax.

The company has also developed a range of risk-management tools, including ePatrol and CreditScan, web-enabled portfolio management tools that match names on a sales ledger with company names in Graydon's databases.

This produces a tailored database of sales contacts for the customer with real-time credit and payment information that can be accessed via the web.

The company also has a ChannelFocus team that specialises in providing intelligence on the computer and telecoms industries' distribution sectors and a Commercial Debt Recovery Unit.