Today, we hear about newer, cutting-edge “alternative data” categories like social behavior. While these new data types certainly have value, accounting data can provide a deep level of insight into an SME, enabling lenders to offer higher value, personalized services to potential customers and build a satisfied, loyal client-base. The daily decisions and transactions a small business makes can determine reliability, or default probability.

However, access to accounting data has been historically cumbersome and involved complex data capture across various systems with a lack of standards. Modern technology is changing that.

Now, lenders can take a fresh look at this data to gain a better picture of SMEs’ reliability and risk by having answers to critical questions, like these:

Financial statements

  • What size/type/frequency of income is the company generating?
  • Where/how does the company spend its money?
  • What is the company’s payroll activity like?

Business customers

  • Who are the company’s business customers?
  • How concentrated are these customers?
  • How quickly do these customers pay the company and does it vary by customer type?

Company viability

  • Are current assets sufficient to meet short term liabilities?
  • Are cash flow trends healthy?
  • How payables days vs. receivables days?
  • How is all of this changing over time?

Quality & financial behavior

  • Is the company fulfilling financial duties in a timely manner?
  • Is the company making best use of their accounting tool?
  • Are there any mismatches on the accounts?

Accounting data is powerful. It is black and white and very hard to misinterpret, resulting in a fair process for both lender and borrower. It reveals critical insights into an SME, helping you decide whether to financially support it or not.

 

To learn more about how lenders can use accounting data to make better decisions, download our latest whitepaper.