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Optimize Your Credit Decisions

General News

Historically high lumber prices also mean historically high credit risk. Considering past credit decisions—have you ever placed a hold on a customer’s credit or granted a credit extension when it might not have been the best decision?

How did you arrive at this decision? When you ask credit professionals this question, they may answer, “My data supported it.”

While this is a logical response, does internal data alone truly offer sufficient information to make tough decisions? Credit professionals constantly wrestle with important business questions, including:

(1) what action should be taken when current customers aren’t meeting established credit terms?

(2) on what basis should an existing customer be granted a higher credit limit? and

(3) what steps should be taken to establish and approve a new account and credit limit?

Mining Relevant Credit Information

Accounts receivable (A/R) is one of a company’s single most important assets. It’s the job of credit managers to protect these assets. Credit professionals may not be out there making sales, but their credit decisions and actions support company stability, growth, and ultimately the bottom line.

When a credit manager has an uneasy feeling about an account, what should be done? A decisive credit professional will access and analyze the customer’s A/R aging data, history, and perhaps even crosscheck it with other known and trusted industry professionals.

For over a decade, many industry professionals are also turning to Lumber Blue Book for a comprehensive overview of the account in question. Lumber Blue Book offers a plethora of risk management tools, from the tried-and-true Ratings and Scores, to credit reports and company alerts.

And, for companies that contribute monthly accounts receivable data, there’s the exclusive online A/R Report feature that depicts a company’s industry payment trends to support confident decision making.

Give to Get

Businesses large and small throughout the United States and Canada confidently and confidentially share their A/R aging data with Blue Book Services. This information shows how buyers are paying for product and services, and plays a pivotal role in Blue Book’s rating process.

Confidentially sharing A/R is not a new concept—companies in this industry, and other industries, have been doing so way back to the days of green-and-white hand-delivered hard copy data printouts. Today, technology allows credit extenders to easily contribute their A/R files.

So what are these benefits and why should you consider providing Lumber Blue Book with your accounts receivable data? These are fair questions with two rather broad answers.

First, companies that submit this data receive a discount to their Lumber Blue Book subscription and “unlock” important online features that their credit and sales departments can reference to make even more informed business decisions. Second, the entire industry benefits as this important information improves the timeliness and accuracy of Blue Book Ratings, Scores, and Reports.

It’s a communal philosophy: by providing this valuable information, each submitting company then gains access to Blue Book’s comprehensive and growing A/R data pool.

“The unique aspect of our offering is that all the credit information is industry-specific,” explains Trent Johnson, Blue Book’s lumber team leader. “The ‘big three’ credit bureaus can be a mile wide and an inch deep when it comes to credit data. On the other hand, Lumber Blue Book collects over $20 billion of A/R data annually, directly from lumber mills, wholesalers, secondary manufacturers and transporters,” Johnson adds.

Using Lumber Blue Book’s online platform, A/R aging submitters can view a company’s industry pay history in graphical format. More in-depth credit data can be found in credit reports provided by Lumber Blue Book.

Broader Benefits

The accessibility of data is important for any industry’s stability and growth, as it is for any company.

It’s vitally important to recognize emerging trade risk, and to be able to do something about it. Negative credit events have cascading effects on those who extend credit and go far beyond the buyer and its seller.

Contributing and sharing A/R data also plays a role in building a customer’s credit profile, detailing how well it pays its customers.

Stable companies that consistently pay their vendors on time deserve recognition. Providing information on pay performance strengthens the supply chain by creating growth opportunities for buyers, their partners, and A/R aging contributors.

Best in class standards

Companies that share intelligence make the entire industry better. By providing A/R aging data, and gaining access to additional data and financial tools, credit departments are supporting their company’s growth and financial performance.

As information technology continues to advance and support industrywide connectivity, sharing information has never been easier—and more important. Data suggests those who do business without proper risk management tools are less profitable and cash poor.

Over time, without the right tools and not doing the right “homework,” making uninformed credit decisions will prove costly.

See around corners and benefit from contributing A/R aging data. Contact a Lumber Blue Book representative to discuss submitting your data files. Be on the positive side of emerging trends.

Zack Champagne is a data specialist, focusing primarily on processing accounts receivable spreadsheets in the Ratings group at Blue Book Services, for over a decade.