What is a Trade Credit Report?

Many B2B businesses are offering credit terms to customers in order to purchase products. Especially when a business is purchasing an extremely costly item, allowing customers to pay for a product or service later creates a more accessible product to more potential customers. However, using credit terms is not always foolproof. You have to vet each potential customer and ensure that they are not at risk of never paying the full amount. In order to determine a customer’s credit worthiness, you should be referring to their trade credit report.

What is a Trade Credit Report?
A trade credit report is commonly used by B2B businesses to determine whether a potential customer is at risk of not paying off their invoices. Similarly, it may be used to keep an eye on customers who always are in good standing to increase their credit limits. It is used like a credit report of your personal finances. Data is compiled on businesses from many different industries, allowing you to compare customers and your own accounts receivable to the industry you are working in.

Using a Trade Credit Report give you a view into the customer’s payment habits. Do they consistently pay 30 days late or do they usually pay early? Do they pay certain suppliers but not others? The answers to these questions can make or break the credit terms you extend to your customers.

What is Included in a Trade Report?
Depending on where you decide to purchase a Trade Credit Report from, the information will be slightly different. However, they should all include the basic payment information about the company. Below, we’ve included what you can find on NACM’s Trade Credit Reports.

  • Company Contact Information
  • Predictive Payment Scoring
  • Chart Analysis
  • Monthly and Quarterly Trending
  • Tradelines
  • Days Beyond Terms
  • High Credit
  • Collection Claims
  • Alerts
  • Financial Institutions
  • Public Records
  • Bankruptcies
  • UCC Filing
  • Inquiries

No matter what company you are using to vet potential customers, you should be doing it before extending any credit. It could be the difference between a struggling business and a strong cash flow.

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