One of the most uncomfortable situations for many SME’s has to do with divulging their detailed financial information, whether it be to a credit information and reporting bureau (CRB) or directly to their supplier. 

A colleague of mine and I were talking the other day about an interesting conversation he had with one of the major CRBs. He had received a call from a credit information verification associate, calling on behalf of a supplier to whom my colleague had submitted a recent order for $120K. “Would it be possible to verify some financial information?” asked the associate. My colleague was caught a bit off guard but responded with a shaky, “I guess so.”

So, the first question my colleague was asked had to do with his 2019 and 2020 sales, gross and net profits respectively. My colleague thought for a moment, pulled out his financial statements and seeing that net profits were not so stellar, replied that it’s his policy not to share company confidential financial information. 

The associate responded that if my colleague was not comfortable, he could send him a confidentiality agreement. This would stipulate that all information provided would only be used to generate an updated credit report and accompanying analyses for the specific potential supplier. My colleague still hesitated, feeling that once his financial information was given, there would really be no way to prevent it from being disseminated, and possibly impacting future credit granting opportunities. 

He requested the associate to send the confidentiality agreement over so he could read it. Within minutes of the call ending, a very long, legal, and complicated document arrived in his inbox. After a quick review, my colleague decided to discuss the situation with the supplier’s credit manager, rather than sign the agreement and submit his financial information.

The credit manager received my colleague’s call with open arms and the two of them got down to business. The upshot, however, was that the credit manager still requested my colleague’s financial statements. According to the supplier’s credit policy, orders for $100K or more from a new customer must be substantiated with financial statements, supported by either the supplier’s or potential customer’s confidentiality agreement. 

Since my colleague was in the same spot, he agreed to pass his financial statements to the credit manager pending a review of their confidentiality agreement. To his pleasant surprise, it was one page and very straightforward, prompting him to sign it and send over the statements through a secure portal. 

At the same time, my colleague asked the credit manager to rescind his request to the CRB, which he ultimately did. One thing to note is that a cancelled credit information request would still be recorded on my colleague’s company credit file, as was explained by the CRB. I’m not sure if it will have an impact in the future, but it goes into the mix of how CRBs may use any kind of information or development, whether it be financially related or not. 

Your thoughts and comments (nseiverd@cmiweb.com) are most welcome!

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