Purchasing a product or service from a business for the first time can require a certain degree of risk evaluation. The consumer who is comparing quality and pricing with competing products and services is also deciding whether or not the business is trustworthy. While a number of factors can contribute to a consumer’s decision to buy–from the knowledge and skill of the company’s customer service representatives to the user-friendliness of its online retail site–one of the most important factors to consider is whether a company can be trusted to deliver as promised.
The same thing is true and even more critical in the retail supply chain. Businesses shopping for suppliers will frequently use a supplier’s D&B Supplier Evaluation Risk rating (SER) to help determine whether or not a supplier will consistently deliver on its promises over time. Contained in a company’s D&B® business credit profile, the SER score can help predict whether or not a company will still be in business 12 months down the road. Businesses are scored on a scale from 1 to 9 with one indicating a low risk of business failure, while 9 indicates an extremely high risk of failure.
Some companies take the SER score so seriously that they will put a supplier on probation, even if it has a positive business history with the company already. For example, a wholesale florist was given 10 days to improve its SER score when it dropped below the threshold set by the mass merchant it was partnered with. A $250K piece of trade had dropped out of its business credit file and it was fortunately able to rectify the situation by adding additional payment history to its D&B credit file within the allotted time using CreditBuilder™, a service that allows a business to submit trade that would otherwise go unreported*.
Even if you’re familiar with the SER score, you may not be familiar with the factors that can affect it. Here are a few key factors cited by D&B as some of what influences a company’s SER Score:
Payment Behavior
- Number of payment experiences
- Payment experiences past due (31-60 days and 61-90 days)
- Negative payment experiences
- Trending Payment Details
Demographics
- Company type (i.e., corporation)
- Ownership of facility
- Total number of employees, SIC, and State
- Years since last management change
- Age of the business
Public Records
- Number and dollar amount of suits, liens, judgments, bankruptcies
- Total number of UCC filings
Financials
- Age and existence of balance sheets
- Net worth indicator
- Return on assets
- Total liabilities to net worth ratios
Though there is no hard-and-fast rule about the highest SER score companies are willing to accept from suppliers before entering into business with them, it is likely that most companies have a maximum rating they will allow. Knowing this is important to understanding whether a business can even qualify for a supplier program.
Because a bad or high SER score can weigh heavily in the decision process, businesses should consider monitoring their D&B® credit report as well as monitoring companies they are interested in doing business with.
Suppliers, in particular, might want to ensure that all information on their report is accurate and complete and be mindful of their SER score when bidding for contracts. Dun & Bradstreet Credibility Corp.’s CreditBuilder allows businesses to both monitor and even build their credit file by adding positive payment history to help impact their D&B credit file*. Suppliers that simply do not have the time to focus on their business credit, but are dependent on it for their success, can seek the help of a Dun & Bradstreet Credibility Corp. professional credit concierge.
Ensuring the reporting of payment history and trade experiences can be critical to securing and maintaining supplier contracts. Improving business credit does not happen overnight. Like building a product to place on the shelf of a retailer, building and maintaining good business credit and a healthy supplier rating requires time and attention.
For more information on business credit, visit DandB.com or call 1-800-280-0306.
The information and opinions provided by Dun & Bradstreet Credibility Corp. are provided “as-is,” are solely those of Dun & Bradstreet Credibility Corp., and may be used by you for informational purposes only. Dun & Bradstreet Credibility Corp. makes no representations or warranties, express or implied, with respect to such information and the results of the use of such information. Neither Dun & Bradstreet Credibility Corp. nor any of its parents, subsidiaries or affiliates shall be held liable for any damages, whether direct, indirect, incidental, special or consequential arising from or in connection with a business’s use or reliance on the information or advice offered by Dun & Bradstreet Credibility Corp. You should consult a qualified professional to assist you in determining the most effective business structure for your particular business.
