What is a Prompt Payment Score and how is it calculated?
A Prompt Payment Score is calculated from available supplier data aggregated from consenting suppliers providing anonymised access to their collections reports. Currently TISCreport has integrations with Quickbooks, Sage and Xero which enable suppliers to make this data available. Once accessed, the following methodology is applied:
1. Payment Categories: TISCreport categorises payment periods into different groups, including "On Time" (paid within the agreed terms), "Delayed" (paid after the agreed terms), and "Significantly Delayed" (paid well beyond the agreed terms).
2. Payment Data Collection: TISCreport collects historical payment data from suppliers, including the dates on which they made payments to their own suppliers. This data is securely stored and analysed to generate payment insights.
3. Weighting Factors: TISCreport applies weighting factors to different payment categories based on their severity and impact on suppliers. For example, higher weights are assigned to "Significantly Delayed" payments compared to "Delayed" payments, ensuring a fair assessment. There are other weighting factors in relation to supplier vulnerability, e.g. size, ethnicity of organisation and sector.
4. Payment Scoring: TISCreport calculates a payment score for each supplier based on their payment behaviour. The frequency and severity of late payments are considered, incorporating the determined weighting factors. A numerical scale, such as 1-10, is used to provide a comprehensive view of supplier payment performance.
5. Periodic Review: TISCreport regularly reviews and updates the payment scores to ensure accuracy and reflect the most recent payment behaviour of suppliers. This process occurs quarterly, semi-annually, or annually, depending on the agreed timeline.
6. Utilising Payment Scores: TISCreport's users can leverage the payment scores to make informed decisions regarding suppliers. Buyers can reward suppliers with higher scores for their prompt payment behaviour, gaining advantages such as preferred contracts, extended credit terms, or other benefits. Suppliers with lower scores may prompt Buyers to conduct further due diligence or engage in discussions to address payment issues.
By implementing this prompt payment scoring method, TISCreport enhances transparency and promotes a culture of prompt payment within the supply chain, fostering healthier business relationships and driving sustainable practices.
If your organisation would like to drive prompt payment practices through your supply chains please get in touch to set up a programme. Please note that the specifics of TISCreport's implementation may vary depending on membership level, and these details can be tailored based on buyer requirements.