Entrepreneur Beginners Guide
“Know Your PAYDEX Score”
A good reputation is more valuable than money.
—Publilius Syrus, Latin writer of maxims
While looking at the requirements of a Fortune 100 companies supply management division, I came across this statement: “Our selection process includes a review of D&B/Dun & Bradstreet (or comparable) reports.” I was reminded of the many business owners 1 have come across who don’t know what Dun & Bradstreet is and how this company can affect their business.
I take pride in having a high credit score or FICO score of 813 in the top 10 percent. Likewise, maintaining my business credit is just as important. In the business world, a company does not have a FICO score. Instead, it has a PAYDEX score, a rating maintained and calculated by Dun & Bradstreet. In other words, what the FI-CO score is to Equifax, the PAYDEX score is to Dun & Bradstreet.
According to its website, Dun & Bradstreet, or D&B for short, is the world’s leading source of commercial information and insight on businesses. Its global commercial database contains more than 200 million business records, which provide customers with quality business information and the ability to make informed decisions. Customers primarily use D&B’s resources to mitigate credit and supplier risk. D&B provides a wide range of business statistics such as liquidity ratios, asset management ratios, debt management ratios, and many other benchmarking tools. The most popular tool is the PAYDEX score.
The PAYDEX score is D&B’s unique dollar-weighted numerical indicator of how a firm paid its bills over the past year, based on up to 55 percent trade experiences reported to D&B by various vendors. The D&13 PAYDEX score ranges from 1 6 100, with higher scores indicating better, payment performance. A score of 75 is roughly equivalent to a FICO score in the low 700s. The D&B website is impressively thorough. You can view a sample of all them types of business credit reports with detailed explanations that D&B offers: the Basic Credit Report, the Standard Report, and the Premium Credit Report. The cost per report is $59.99, $119, and $159, respectively, as of summer 2012.
If you are in business and have requested credit before, chances are that a company has requested your D&I3 credit report. Many startups and small businesses are not even aware that they have a DUNS Number and corresponding credit report. Your creditors or vendors can report payment history about you, and D&B will assign you a D&B DUNS number. As with personal credit, be proactive in making sure that your company credit report is accurate and complete, that you find out your PAYDEX score, and that you learn how to obtain and to maintain the best report and PAYDEX score possible.
I strongly recommend that you read everything on the D&B website, because it is an essential step toward effectively managing your business credit, which helps to drive down costs and improve cash flow—not to mention it could be the determining factor that helps you close a big deal to become a supplier for a major company