Understanding Trade Credit Reference and Litigation Information: A Guide for Businesses

Understanding trade credit reference and litigation information is essential for businesses navigating the financial landscape. Trade credit, which allows companies to purchase now and pay later, offers significant flexibility, helping to manage cash flow and operational efficiency. However, assessing a business partner’s creditworthiness and legal history is vital for mitigating risks and fostering reliable business relationships.

Think of a trade credit reference as a recommendation letter for businesses. It is a report one business provides to Credit Reporting Agencies about a customer’s creditworthiness. This reference tells you how reliable a customer is in paying their bills on time and honoring their credit terms.

Key Components of Trade Credit References:

• Credit Details: Information about the credit terms extended to the customer.
• Statement Date: The date when the statement is issued.
• Aging Days (Outstanding and Default): Number of days invoices have been outstanding or in default.

Why Trade Credit Reference Matters:

For businesses, having a negative trade credit reference can be detrimental. It erodes trust with suppliers, limits access to favorable credit terms, and can result in reduced credit limits in the future. Just like a poor personal credit score, a negative trade credit reference indicates unreliability and a higher risk, making it challenging to secure necessary credit and maintain healthy business relationships.

Litigation information is all about a business or individual’s litigation records. It focuses on their involvement in lawsuits, which is one of the crucial factors for assessing potential risks when entering a business relationship.

Key Components of Litigation Information may include:

• Details of Parties, 
• Details of Proceedings (which may include location of the proceedings, stages of the proceedings etc.) 
• Sources of the Litigation Information   

Why Litigation Information Matters:

For businesses, keeping track of litigation information is vital for several reasons. It may help you to stay more informed about some of the legal suits involving your customers and service providers, assess risks, and make informed decisions about your business relationships with them . If you’re considering a business relationship with themo, knowing some of their litigation recordsmayreveal potential red flags and assist you to make decisions to mitigate risks of future disputes.

As one of the Credit Reporting Agencies (CRAs) in Malaysia, CBM collects and compiles trade credit reference and litigation information to support businesses in making informed financial decisions. Submitting trade credit reference and litigation information to CBM has several benefits:

1. Enhance Credit Decision-Making: By sharing accurate and detailed trade credit and litigation data, businesses contribute to a robust database that helps all participants make better-informed credit decisions. Access to this comprehensive data allows businesses to assess potential partners’ creditworthiness and legal standing more effectively.
2. Improved Debt Recovery: When businesses have access to comprehensive credit and litigation information, they can better manage and recover outstanding debts. By understanding a debtor’s financial health and history, companies can tailor their debt recovery strategies, leading to more effective collection processes. This reduces the time and resources spent on chasing payments and increases the likelihood of successful debt recovery.
3. Incentivised Payment: The knowledge that their credit behavior is being monitored and reported to a CRAs like CBM incentivizes customers to maintain good credit practices. Businesses and individuals are more likely to pay on time and adhere to credit terms when they know their payment history will impact their credit score and reputation. This leads to more consistent cash flow for businesses and reduces the incidence of late payments or defaults.

Submitting your trade credit reference (TCR) and litigation information to Credit Bureau Malaysia Sdn Bhd (CBM) is a straightforward process that ensures your data is secure and compliant with CBM’s guidelines. Here’s how you can do it:

1. Prepare Your Documents

• Compile the Data: Gather all necessary trade credit reference and litigation information.
• Complete the Prescribed Templates: Email [email protected] to obtain the necessary templates for submitting your data. Ensure all information is accurate and filled out according to the guidelines provided.

2. Submit

• Send Your Documents: Once your documents are prepared and the templates are completed, submit them via email to [email protected]. Ensure you follow any specific instructions provided by CBM to avoid any delays.

3. Reflect

• Data Appearance: Once submitted, your data will be processed by CBM and will appear on the relevant entity’s credit report. This encourages timely payments and helps maintain accurate information on the entity’s credit standing.

4. Update

• Update Information: If there are changes in the entity’s credit status, you can update their credit report by repeating the process. Gather the updated information, complete the templates, and submit them again to [email protected] to reflect the new status.

Having access to accurate credit information is key to making smart business decisions and managing risks. When you submit your trade credit reference and litigation information to Credit Bureau Malaysia Sdn Bhd (CBM), you not only improve your own operations but also help create a more transparent and stable financial environment in Malaysia. This kind of reporting encourages timely payments and responsible credit behavior, benefiting everyone in the business community. So what are you waiting for? Contact [email protected] to get started, today!