Every business needs a Paydex score. In this blog we’ll discuss how a Paydex score can benefit your business.
What is a Paydex Score?
A Paydex score is a business credit score assigned to your company by Dun and Bradstreet, the largest business credit bureau in America. This score is a clear indication on how well you pay your suppliers and vendors. A Paydex score can range from 0 – 100 and is based on your history of trade references. Trade references is simply a term used for suppliers and vendors. In order for a Paydex score to be generated, Dun & Bradstreet recommends that you have at least 4 separate trade references on your company’s credit profile. Leap21 encourages their clients to establish business credit as early as possible. It’s important to understand as your company matures, so will your access to different lines of credit. All of trade references remain on your file, but only the last two years are used to calculate your Paydex score. Therefore, it is in your company’s best interest to have a consistent flow of trade references being reported.
How to get a Paydex score?
In order to generate a Paydex score, your company must first obtain a DUNS number from Dun and Bradstreet. A DUNS Number is recognized and often required by many organizations and governments across the globe. Once you have a profile you can begin establishing relationships with vendors using your DUNS Number. Vendors often deliver goods and services, and invoice businesses for payment afterwards. Vendors take a huge financial risk by doing this because they may never get paid. Hence, by paying your suppliers and vendors on time, you can build trust and long-lasting relationships. After you begin to show payments to your vendors with your DUNS Number, you start to generate a Paydex score. The Paydex scoring system helps suppliers determine whether or not to extend net terms to your business. Lower scores make suppliers resistant to do business with you or may limit the size of services they are willing to agree to.
How long does it take to build a Paydex score?
Your Paydex score is based on your company’s payment history with suppliers and vendors, in relation to payment terms. A typical payment term is a “Net 30” agreement. This means that you will have 30 days from the purchase date to pay that purchase in full. However, some vendors offer a net 55 or net 60. This wider window of payment terms can give your business more flexibility and ease your ability to pay on time or early, which will positively affect your score. Leap21 encourages clients to pay vendors earlier than agreed upon payment terms .
Leap21 knows businesses often have trouble generating a Paydex score. Their programs, helps generate, build or maintain your Paydex score, while reducing denials as much as possible.
What is a good Paydex score?
As a business owner it is important that your business is viewed a low risk. Having a Paydex score of 80 or higher will help you qualify for better credit terms and lower interest rates when applying for small loans.
Who might access your Paydex score?
Paydex scores are widely used by banks and non-bank lenders. According to D & B: Anyone can purchase your business’s credit report. Customers, suppliers, lenders, and landlords may review your PAYDEX Score in order to help
- Decide whether or not to do business with your company
- Set credit terms that more accurately reflect the level of financial risk that your business represents
- Set insurance premiums
- Decide if they want to take you on as a tenant
If you have any questions how a Paydex score can further benefit your business, contact Leap 21 for a free consultation.
It’s time to build business credit.