For many small and mid-sized businesses (SMBs), extending trade credit to customers is essential for growth. But how can you ensure you’re making informed credit decisions and minimizing risk? One often-overlooked tool is participation in trade credit data exchanges, such as those operated by Dun & Bradstreet, Creditsafe, Experian, and the National Association of Credit Managers (NACM).
These networks offer a wealth of information to help you make informed credit decisions, reduce DSO (Days Sales Outstanding), and minimize bad debt exposure. However, accessing and utilizing these exchanges can be a challenge.
Why Trade Credit Exchanges Are Essential
In an increasingly interconnected economy, businesses face growing challenges in managing credit risk. Late payments, defaults, and financial instability can have ripple effects across supply chains. Trade credit exchanges offer a robust solution to these challenges by providing transparency, fostering accountability, and enabling informed decision-making.
By participating in a trade credit exchange, businesses not only protect their own financial interests but also contribute to a more stable and trustworthy economic environment. The benefits—from improved risk management to stronger business relationships—make these exchanges indispensable for companies of all sizes.
How Trade Credit Data Exchanges Work
Trade credit data exchanges operate on a "give-to-get" model. Businesses contribute accounts receivable (A/R) information, essentially an aging statement or a snapshot of who owes them money. This data is pooled and anonymized, creating a more complete view of payment behavior across various industries. In return for contributing data, participants gain access to the aggregated payment history of other businesses, helping assess the creditworthiness and payment risks of customers.
Risk and Burden of Manual Participation
While the benefits of trade credit exchanges are clear, the traditional participation process is often cumbersome and time-consuming for SMBs. Here's a breakdown of the typical steps and the associated challenges:
1. Data submission is manual or requires custom development
Businesses must regularly extract and submit their A/R aging statements from their accounting system (QuickBooks, NetSuite, Microsoft Dynamics 365 Business Central, etc.). Then the extracted data need to be formatted according to the exchange's specifications, and each credit agency has its own specifications.
2. Ongoing monthly maintenance
Participation isn’t a one-time task. Companies must submit updated A/R files every month to keep their credit insights current. This requires ongoing effort from accounting and credit management teams who are already juggling multiple responsibilities.
3. No feedback loop to accounting systems
Even after investing time in submission, the insights provided by trade credit exchanges are typically available only through web-based dashboards or PDF reports. Businesses must manually review and cross-reference these insights with their accounting systems, creating more work rather than streamlining operations.
The Impact on Your Business
For already busy teams, participating in trade credit data exchanges adds yet another process to their workload. The manual nature of participating in trade credit exchanges creates several challenges for SMBs:
- Time-consuming: Preparing and submitting data each month takes valuable time away from credit management teams, who are likely already stretched thin.
- Error-prone: Manual data handling increases the risk of errors, potentially leading to inaccurate credit assessments and lost revenue.
- Difficult to use the insights: The inability to seamlessly integrate credit data back into accounting systems limits its usefulness and creates additional manual work.
- Missed opportunities: Many SMBs simply avoid participating in trade credit exchanges due to these complexities, missing out on valuable insights that could improve their credit management.
Truverto Simplifies and Secures Trade Data Exchange Membership
Truverto eliminates the manual effort and complexities associated with trade credit data exchanges and inserts the results back into your workflow. Our SaaS platform seamlessly integrates with your accounting software and automates the entire process:
- Automated Data Extraction: Truverto automatically extracts the necessary data from your accounting system (QuickBooks, Microsoft Dynamics 365 Business Central, NetSuite, and others), eliminating manual report generation.
- Automated Formatting and Submission: Truverto automatically formats the data according to the exchange's requirements and securely submits it on your behalf.
- Automated Monthly Updates: Truverto handles the monthly data updates, ensuring your credit information is always current.
- Enrich Customer Records: Truverto finds the best insights across multiple data sources. Then Truverto enriches customer lists in accounting systems automatically, empowering data-driven credit decisions directly within existing workflow.
- Save Time and Reduce Errors: By automating the process, Truverto eliminates manual effort and ensures accurate, up-to-date customer data.
With Truverto, SMBs can enjoy the benefits of trade credit data exchanges—improved credit decision-making, faster payments, and reduced risk—without the administrative burden.
