Trade credit bureaux are some of the most valuable tools in a credit professional’s box. These bodies help credit departments manage risk. They are also an important networking and mentoring forum. Here, we profile four people who lead credit bureaux to help members understand how they operate and how to make the most of them.
Trade bureaux are forums to exchange information regarding debtor payments for businesses in the same industry sector. As Clark explains, the extent to which a customer is in debt to other suppliers in the same industry is a useful indicator of the likelihood of a debtor not paying its other bills. “Industry trade bureaux are good at facilitating the exchange of this information,” he states.
Aside from arranging regular meetings at which members can discuss their problem debtors, the Building Industry Credit Bureau also manages a comprehensive online database to which members have access. “But they still find it invaluable to come to face-to-face meetings,” Clark advises. Meetings tend to follow the billing cycle and are usually held monthly, although some bureaux run bi-monthly meetings. “We run them monthly in metro areas. But in some regional areas we run them every two months.
All members, including the regional ones, have the opportunity to come to a city meeting,” says Clark. Most importantly, information shared at meetings can help members reduce the risk of incurring bad debts. One of the ways they do this is by identifying customers who switch suppliers due to non-payment of accounts. “Quite often you’ll get two or three suppliers sitting in a meeting talking about a customer on stop, and another member will say ‘Oh that’s why they’ve come to us now’, so it’s very valuable for that sort of information,” Clark adds. “It gives members the opportunity to identify payment trends in the industry as well.
So if one member discloses they are having a problem with a customer other members might realise they’ve got a potential problem looming and they can do something about it. So it’s an early warning system for credit staff,” he adds.
Credit bureaux are an important way of providing members with up-to date data about the risk attached to their credit portfolio. They augment the data Dun & Bradstreet, Equifax or Creditor Watch provide. Hurst explains before meetings members compile a list of customers they want to discuss. He says there are generally between 60 and 120 customers on the schedule.
According to Hurst the bureau tends to meet in the middle two weeks of each month. “During that time organisations have finished their month end,” he explains. Meeting participants sign an agreement they’re going to provide data that will enable other members to gauge on a credit risk basis whether a customer is right for them and what their credit limit should be. Credit bureaux provide addition information relating to current trends within the credit industry, and provide an education avenue for members.
Guest speakers are invited to present information on a number of topics from PPSA to recent court actions. “Expect to have a far better understanding of who you’re selling to by attending these meetings; you get much better information than you get just by sitting in front of the computer and looking at reports,” Hurst says. “If a member has a problem with an account and other members are able to hear about it from them, it gives them the opportunity to start asking the customer additional questions,” he adds.
Networking and mentoring opportunities are some of the main reasons to join a credit bureau. “When credit managers attend a credit bureau they meet other credit managers from their industry and are able to discuss mutual problem accounts with them. Meeting face-to-face builds up a confidence and trust with the other person so credit-related information can be freely shared without fear of their confidence being abused or breached,” he says.
Having worked as a credit manager in several industry groups, Milne has been involved with several different credit bureaux. He has established more than three credit bureaux. He says credit bureaux afford senior credit people the opportunity to pass on their knowledge and experience to younger up-and-coming credit managers or to credit managers who have come into an industry group from other sectors.
Milne says meetings tend to go for three or four hours. “We normally have a networking lunch after the meeting, so members can discuss one-on-one with colleagues problem accounts that were raised during the meeting. It’s also an opportunity to pick people’s brains if they have a credit-related problem or issue.” As a 40-year credit bureaux veteran, Milne says they offer participants value on several levels. “It’s an opportunity to be a better credit manager,” he says. “If your bureau is well attended, it is the only place you’ll get insight into accounts in your industry and an honest and open view of what’s actually,” says Przibilla, when asked about the benefits of joining a trade credit bureau.
Aside from the inside running attending a bureau offers members, she also stresses membership is a great business networking tool. “It will expand your learning about new challenges and different ways to manage them,” she explains, adding that her meetings generally run for about 90 minutes. According to Przibilla, in a well run bureau, members should have confidence in the facilitator and that the information being provided is treated in the strictest confidence. “Members should also feel sure the summation report is accurate and encourages good conversation,” she says. Przibilla explains meeting face to face is essential as credit is about much more than just the numbers. “You’re dealing with opinion and it’s important to have a conversation.”
What’s the cost? Cost of membership of a trade credit bureau depends on how many times the bureau meets a year and the nature of the bureau. Costs start at about $1,000 a year and range upwards from there, depending on the nature of the bureau and the industry sector it operates in.
*By Alexandra Cain, a freelance finance journalist who has written for many leading Australian and international business publications.