What is the payment indicator publicly shown on the credit bureau of your company?

The payment index is calculated by averaging the number of days you have been late in paying your suppliers. This is a good indication of your company’s payment habits and allows your future business partners to evaluate when to expect to be paid for goods and services supplied to your business.

Payments to suppliers must be made in full each month. This is the best way to measure the payment habits of businesses. Financial trades, such as payments for credit cards, leases, and the purchase or leasing of vehicles, equipment, and long-term loans, are excluded from the payment index.

Current period

In general, a supplier will give a client 30 days for repayment before deeming the loan late. The grace period is known as the current period. It varies depending on the business and the industry.

Food industry businesses, for example, will require payment earlier than 30 days due to the perishable nature. Steel industry companies, on the other hand, are satisfied with payments received in 90 days or less. To the extreme, mega-stores that offer the best prices to consumers will have to pay their suppliers within 120 days to avoid being considered late. This is an advantage they take advantage of due to their position. Most imposing companies will decide on their payment terms to their suppliers.

Past due dates

Every bracket of 30 days after the current period is a new late period.

• 1st due date: 1-30 days past the current period
• Past due period for two and 31-60 days following the recent period
• The third past-due period is 61 to 90 days after the current period

The current period varies between companies. Also, the payment index only shows the average days that have passed since the recent period has exceeded. If a supplier gives 15 days for the current period, and the payment index shows that the business is 20 days late, then it has been 35 days since the invoice was sent. If the current period is forty days, and the payment index shows that the business has 20 days of past due payments, then it’s been 60 days since the billing. It can be used to isolate late days and compare them among suppliers.

The result

A payment index scale ranging from 0 to 100. The scale ranges from 0 to 100. 0 indicates that the company pays all its bills on time. One hundred means they are late or don’t pay at all.

Most businesses, based on 30 days, have an average payment index below 30 (60 days after being invoiced). Companies that have a payment scale greater than 30 start to experience difficulties. If the index is over 90, then it’s considered bad debt.

The trend in payment over the past few months is very important to your commercial credit report. Are the payment habits of the business stable, or are they starting to pay later? If companies start paying late, it could be an indication of cash flow issues.

Here are some tips on how to improve your credit score.

• Bring your account as close as possible to the current period
• Any amount that is late more than 90 days should be avoided at all costs
• Credit bureaus will want to know about a large number of positive references.

This calculator will calculate the public credit bureau payment index for your company. In the appropriate period, enter the outstanding balance of your non-financial transactions. You can play around with the amounts and see how they affect your score. Then, adjust your average.