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What is a Paydex®

Aug 17, 2007
Paydex® is a dollar weighted numerical system that was developed by Dun and Bradstreet to track the performance of companies to pay their bills. A higher Paydex® score means that a business or company pays its bills almost always on time and is an indicator of how well they may be counted on to pay their bills in the future. A lower Paydex® score will usually mean that the business has had some trouble paying its bills on time at some time during the last year.

Dun and Bradstreet have also developed a Paydex® score key to interpret these scores that they prepare and they range the scores on a scale from unavailable to companies that pre-pay their invoices. Within the range it is also possible to identify companies that are paying their bills a little beyond the normal due date of 30 days to those are almost three months behind in unpaid invoices.

Suppliers use the Paydex® system to determine how much product they should advance to companies and businesses and in some cases even if they should enter into supply arrangements with these companies at all. Banks and lending institutions use the Paydex® system to determine the credit risk of businesses and it has been known to be a key factor in approving or turning down applications for business loans or extensions to business lines of credit.

Dun and Bradstreet collects this information by asking suppliers to record the payment records of the companies they do business with and then provide Dun and Bradstreet with a report of payment activity if they are tardy in making payments. They collect this information from across the country and around the world and then provide it back to supplier so that they know what level of risk they might be exposed to by doing business with any particular company.

The Paydex® system is also sold to banking and financial institutions and special reports can be generated for most businesses in the country within a matter of minutes. These detailed reports will show the payment records and any late payments reported by suppliers over the previous 12 months. Dun and Bradstreet also prepares a number of reports that utilize the Paydex® information to show the payment trends of individual companies, groups of businesses and even entire sector reports that show how companies are comparing to others in their sphere of business.

A business can improve their Paydex® score by improving their payment performance. This can increase the possibility of obtaining credit at good interest rates from the banks but is also a way to tell your fellow businesses that you are a good credit risk as a buyer of their goods or services.
About the Author
David Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
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