September 2010
Volume 4 Issue 1 - September 2010
EU COLLECTIONS
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THE SMART WAY TO COLLECT DEBT
LEASE ACCOUNTING FRAUD WARNINGS PREDICTIVE ANALYTICS OFFSHORING EXPERIENCES
EU COLLECTIONS
CCR world
BENEFITS OF STANDARDISING FINANCIAL INFORMATION Whilst it is vital to get as much information as possible on your customers, the differences between the available data across Europe can sometimes be a problem By Louise Green Anglo Saxon countries – to provide existing or potential shareholders with a true and fair view of the company, for example in the UK, Ireland, Denmark and Netherlands. Continental countries – to provide the authorities with information for taxation
was not practical for a pan-European database – we would have incomparable reports and many unpopulated fields. We created a standardised report that balances the requirement for detail with comparability. This report has 26 balance sheet items, 26 profit and loss
Whilst company financials across Europe remain complex, the situation is improving and we are seeing increases in availability and statistics and to offer a protection to the credit grantors, for example in Germany, Switzerland, Italy, Belgium and France. It was only after 1974 that the filing of accounts became mandatory in most EU member states, and the extent to which this happens still varies. Sourcing data locally is the answer Bureau van Dijk (BvD) set out to provide a source of comparable European company information. In 1993 we launched a pan-European database called Amadeus. Our approach was different from existing products on the market. We wanted to use local, expert information providers who understood their culture and how to source information. The first version of Amadeus covered 60,000 companies from 12 countries. Nearly 20 years later it covers 15 million companies from 43 countries and combines data from 35 providers. Its coverage increase is due to continually sourcing new information providers and an increased availability of data in some countries. Standardising data Our domestic company databases show financials in local, detailed formats. This
September 2010
items, 32 standard ratios plus the option to create your own ratios and import your own fields. Comparable financial strength data across Europe – is it possible? Comparable balance sheets and P&Ls is one thing, but we knew our customers were looking for a coherent method to assess the financial strength of companies across Europe.
probability of default plus a confidence level. A domestic average for the sector for each is also given. Modelled on the financial information in the company reports the ratings are transparent. Users can view the ratios, with coloured indicators, behind the calculations and they can have access to the full methodology. As the indicators are modelled on financial data ModeFinance is able to apply them to a large group of companies, even small companies can be measured this way. This is an objective approach. It uses ‘official’ sources of financial data. Its assessment incorporates multiple components in the same way a financial analyst would. It evaluates, then aggregates, elements of a company’s financial behaviour: profitability, liquidity, solvency, interest coverage and efficiency. Finally, the models for account type and sector are weighted so a BB rating is comparable across all sectors and all countries. This is one of the most valuable elements of this system as it can be considered a standardised measure. Whilst company financials across Europe remain complex, the situation is improving all the time and we are seeing
It was only after 1974 that the filing of accounts became mandatory in most EU member states, and the extent to which this happens still varies In 2009 we added proprietary modelled ratings and indicators to Amadeus as a result of a partnership with ModeFinance. ModeFinance has created the MORE rating model, where Continental and Anglo Saxon formats are accounted for in their modelling, and the companies are looked at in the context of the following sectors agriculture, industry, energy, construction, commerce, service, finance and holding companies. Companies are given a rating AAA to D with categories ‘healthy’ to ‘risky’, a
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increases in availability, but I doubt it will ever be completely standardised. Meanwhile, look for suppliers that understand the differences and can show you how they are embracing the challenge. CCRW Louise Green is international marketing manager at Bureau van Dijk E-mail: louise.green@bvdinfo.com
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