Credit Q&A | Part 3
This is the third in our series on credit and related issues.
Q: Why is a low PAYDEX score a cause for concern?
A: Dun & Bradstreet's (D&B) PAYDEX score is a trademark algorithm that is a unique, dollar-weighted, numerical indicator of how a firm has paid its bills over the past year. This is based on trade experiences reported to D&B by various vendors (creditors).
The D&B PAYDEX scores range from 1 to 100, with higher scores indicating better payment performance. D&B may also provide a three-month trending PAYDEX score that allows the analyst to evaluate the recent payment performance. A score of 80 or higher represents a good payor. A score of 70 indicates payments to creditors averaging 15 days beyond terms. Most industry standards would view this payor as moving toward slow pay. And some creditors may assess penalties, such as late charges or interest, when payment terms exceed 15 days. Payors with PAYDEX scores around 50 are paying on average 30 days beyond terms, and that is usually an unacceptable payment performance.
The lower PAYDEX scores are a concern because it's an obvious sign of slow payments. But it's also a likely indicator of a customer who has financial problems. And financial problems may be the result of a weak economy, poor business practices, too much debt, fraud, etc.
Q: How are deposits set?
A: Per Oregon Revised Statute (ORS) 656.552 (1): If the State Accident Insurance Fund Corporation (SAIF) finds it necessary for the protection of the Industrial Accident Fund, it may require any employer insured with [SAIF], except political subdivisions of the state, to deposit and keep on deposit with [SAIF] a sum equal to the premiums due [SAIF] upon the estimated payroll of the employer for a period of not to exceed six months. SAIF will set the deposit based upon the payment plan and the amount of premium that is likely to be outstanding in the event we have to cancel coverage.
Q: What types of deposit will SAIF accept?
A: The most common deposit that customers provide SAIF is cash. However, per Oregon Revised Statute (ORS) 656.552 (2), SAIF may, in its discretion, accept an employer's surety bond, letter of credit, or similar instrument.