At the heart of the upgrade was a data set of more than 88m trade payments, sourced directly from suppliers’ accounting software and fed automatically into Creditsafe’s ratings algorithm.

The expectation, according to Ian Carrotte, founder and chief executive of print industry credit specialist ICSM, was that the average company rating and recommended credit limit would actually improve. The reality was somewhat different.

Companies from across the print industry suffered significant downgrades, with many going from ‘very low risk’ (with scores in the high 80s and 90s out of 100) to ‘very high risk’. One extreme example saw a well-known digital printer’s rating slashed from 94 to 7.

The downgrade has been so pervasive that many assumed Creditsafe had simply taken a dim view of the print sector – perhaps not unreasonably based on the past few years’ performance. However, this is unequivocally refuted by the company itself, a spokesman for which said: “There was no specific upgrading, or downgrading, of company ratings or limits assigned on the basis of firms coded as operators within the print industry.”

What then has caused the widespread reduction in recommended credit limits to SME printers? The answer would seem to lie in the payment performance data and specifically the number and frequency of any late payments.

Kube Print was told that part of the reason for its downgrade was that “essentially all of our payments were late”, according to director Huw Harcombe. This is a common refrain among printers that have been downgraded, leading to speculation that Creditsafe had applied a blanket 30-day payment cycle, which would mean anyone paying to agreed terms of, say, 60 days would be deemed ‘late’ by the system.

According to Creditsafe, such speculation is categorically wrong as there is “no uniform timescale for payments built into the system”. Rather, the suppliers of the payment data also input their contractual payment terms.

Nevertheless, Kube Print, which has subsequently switched to ICSM and Experian, said that the latter has data on its payments going back a decade, in which time it has only made three late payments, all of which were settled within three days of going beyond terms.

This is where we hit a Catch-22 because Creditsafe has effectively put its faith in the infallibility of its payment data. This is not to say that printers cannot challenge any change to their credit rating (anyone wishing to do so should email ratingsenquiries@creditsafeuk.com) but they will find it very difficult to challenge any instances of late payment.

Creditsafe is adamant that it is impossible for suppliers of payment data to manipulate the system to negatively impact another company’s rating and due to data protection laws it is unable to give out the specifics of any instances of ‘late payment’ for the affected company to challenge.

All of this leaves printers affected by Creditsafe’s ratings model upgrade with a limited choice. One option is to do what Kube Print has done and switch to a different credit information provider and use that company’s rating to counteract any jittery feelings from suppliers in the wake of the Creditsafe downgrade.

Another option – more for suppliers than printers – would be to ignore the new ratings until any teething problems have been worked out (a revision in late August/early September has already seen some printers recover some of their lost credit score). This is the approach Ace Office Environments’ credit controller Jan Dutton has adopted.

“If the current reporting is all-singing, all-dancing perfection, then that means the old ratings and limits must have been rubbish,” she said. “We have been basing business decisions on the prior data they provided.”

Of course, not all printers will have been downgraded. Welsh commercial printer MWL Print Group still had a credit rating of 70 and was rated ‘low risk’ following the switch-on of Creditsafe’s new enhanced model, although the fact it ceased trading on 29 August suggests that that was perhaps something of an oversight. All ratings companies are at pains to point out that ratings and suggested credit limits are indicative guides only and it can only be hoped that print suppliers don’t set too much store by Creditsafe’s latest set because, aside from anything else, as Carrotte points out: “they wouldn’t have many customers if they did”.

Opinion: Payment performance data doesn’t tell the whole story

Ian Carrotte, chief executive, ICSM

Creditsafe’s previous ratings model was built in 2008 and times have changed somewhat since then. However, the inclusion of the new ‘payment performance’ data in the calculation of ratings and scores is worrying and has already had an impact on many printing company’s credit scores and ratings.

If, as seems to be the case with many printing companies, your rating has dropped, the cause would usually be pretty obvious within the body of the credit report. You would probably be able to see the cause among the numbers filed in your accounts or judgments registered against you.

With Creditsafe’s new ratings, this would appear to no longer to be the case. It may now be that you will have to consider that a computer program somewhere has anonymously classified your customer (or you) as a bad payer. 

Many companies that have challenged their new ratings are being told that the downgrade is down to “payment performance data” in spite of the printer stating quite categorically that they pay all their suppliers on time (though, of course, they would say that wouldn’t they?)

The fact that this data is invisible and anonymous – or extremely difficult to access – and that users are having to trust that the providers of the payment performance data are feeding accurate and pertinent information into the system is a problem.

It is natural to distrust anonymous data gathered by computers from other anonymous computers and in my opinion how ratings and scores are achieved should be transparent and open to question, if necessary. Can a company that has been downgraded, or a third party (such as a supplier), check the accuracy of the data if there is doubt, or the validity is disputed? It seems they can, but with great difficulty.

As with all information used when making a credit decision, it needs to be viewed subjectively. If the average paper merchant were to take as read the scores and ratings of its customers without taking into account experience, they probably wouldn’t have many customers at all, as they would have turned them away based upon a computer’s opinion of their creditworthiness.

In summary, always look further than just the score and rating on any credit report. There is no substitute for grass-roots industry knowledge and experiences. 

Reader reaction: Have you been affected by Creditsafe’s new ratings model?

David Henstridge, financial director, Amberley Labels

“We had a credit rating of 90 and a recommended credit limit of £100,000. We filed our 2014 accounts and went in to have a look expecting to see an improved score and instead it had actually been reduced to 37 and our credit limit halved. In the past few days that score has changed to 53, but that is quite concerning because if our suppliers were to look at our score they might decide they need to start reducing our credit. It could cause us a major problem and affect our supplies in the long term.”

Huw Harcombe, director, Kube

“Our rating had been 95 with a £25,000 credit limit for years, then suddenly it dropped to 20 and cash-only transactions. I’ve heard that they’ve applied a 30-day payment cycle, but we pay to agreed terms of 60 days, so as far as Creditsafe is concerned all our payments are late. We’ve now switched to Experian who have got payment data on us going back 10 years and show only three instances of us going beyond terms, all of which were resolved within three days. Creditsafe have been incredibly arrogant about this.”

Gary Peeling, managing director, Precision Printing

“Creditsafe isn’t really on our radar, although we do track our D&B rating. It is good to keep an eye on ratings because matters like a small claim filed in error can have a big impact. Like all automated systems it’s only as good as the data going in and clearly none of these agencies qualify the data. So as with any rating it’s good to check that it’s fair. In most cases, printers access credit from suppliers that understand the industry and those guys should be relying on better solutions than Creditsafe.”