CREDIT REFERENCE AGENCIES INTELLIGENT THINKERS Credit Reference Agencies are stepping up to the plate to support the economic recovery. AUTHOR – Sean Feast FCI<strong>CM</strong> LATE payment, the cost of living, and the need to accelerate Companies House reforms are three of the biggest challenges facing credit reference agencies (CRAs) and the wider business information industry at large. Meanwhile, ongoing uncertainty surrounding the COVID-19 pandemic remains a concern, but has accelerated innovation, especially in the digital space, and the industry feels it is well placed to support the economic recovery. Tim Vine, Head of International Finance and Risk Solutions, Dun & Bradstreet, says late payment – defined as customers paying their suppliers beyond the agreed payment terms – is putting pressure on cashflow for millions of businesses: “Late payments from customers initiates a domino effect,” he explains. “Should the final end customer pay late this ripples up the supply chain which all businesses in the chain have to contend with. “When late payments do occur, it is small businesses who feel it most and are disproportionately impacted. In 2020 we found, on average, SMEs were owed £130,445.04 in late payments, and over a fifth needed to use personal savings or assets to cover shortfall. When you add the impact of COVID loans which are starting to become due, alongside existing business loans, the pressure is mounting on businesses’ cashflow and their ability to pay suppliers in a timely fashion.” Tim believes it is more important than ever that businesses have a comprehensive view of their potential risks: “To gain this view and help stay protected financially, businesses can leverage data and predictive analytics to gain a detailed understanding of the previous payment behaviour of their customers, while seeking to anticipate future performance, to mitigate the potential impact of late payments on their cash flow.” LEVERAGING DATA Jo Kettner, Chief Executive Officer of Company Watch, a specialist commercial CRA, agrees that leveraging data is key to managing risk. To that end, she is keen to ensure that Companies House reform gets before Parliament: “The resignation of Lord Agnew in January <strong>2022</strong> was due to the Government deciding to drop the Economic Crime Bill which would have been the vehicle for this happening,” she explains. “Subsequent pressure, and perhaps the situation in Ukraine, led to the Prime Minister saying on 2 February that there would be an Economic Crime Bill in the “Mundane and manual tasks that would typically take hours to complete – and often using pen and paper – can now be automated, giving finance departments time back to do revenue generating work instead.’’ third Session of Parliament. One member of the House of Commons Treasury Select Committee said he would ‘be amazed’ if this doesn’t include Companies House reform, but we’ve not seen the Bill yet, so it isn’t certain that these vital reforms that are so long overdue will be included.” Jo also believes that now is the time to make the case for the release of more Government datasets: “We would particularly welcome the employee numbers in Real Time Information filings which can be used both to validate information held at Companies House, and also provide a more up-todate pulse on company performance,” she adds. James Jones, Head of Consumer Affairs at Experian UK&I, says that the cost of living is likely to be a significant factor for all sectors of the economy over the next 12 months: “Rising inflation, coupled with a substantial rise in energy prices from April, could see household finances becoming strained, dampening demand and confidence around spending, which will have a knock-on impact across the economy,” he says. COVID, he continues, has hit the sector hard, but CRAs have been fast to react: “As a result of the pandemic and associated lockdowns, consumer spending, borrowing and almost all economic activity reduced. However, by last summer demand for borrowing had recovered to reach pre-pandemic levels again, with many households also able to swell their saving balances causing pent-up demand to spend. “During the crisis, we took a number of positive steps to support consumers, clients and the wider industry. Working with the other CRAs, we agreed the introduction of the emergency payment freeze, which meant those who agreed a payment holiday with their lender had their credit scores protected. Our open banking powered Affordability Passport, which gives organisations a more complete picture of someone’s financial circumstances quickly and can help identify those who maybe become vulnerable because of a change in circumstances, was made available for free. And our data expertise helped local authorities, councils, NHS Trusts, fire services, food banks and other major charities to get help and support to the most vulnerable during the crisis. Our business data has also been used by the UK Government to plan and forecast support measures for businesses.” TOUGH TIMES Dan Hancock, Managing Director of CoCredo, says that the last two years have been tough, and with uncertainty comes the increased need and Brave | Curious | Resilient / www.cicm.com / March <strong>2022</strong> / PAGE 12
Brave | Curious | Resilient / www.cicm.com / March <strong>2022</strong> / PAGE 13 continues on page 14 >
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