Using Payment Practices Reporting (PPR) data as part of your due diligence can provide valuable insights into the financial health and stability of a business. Here are a few reasons why it can be beneficial:
Assessment of payment behaviour: PPR data allows you to evaluate a company's payment behaviour and track its historical payment performance. It provides information on whether the company pays its suppliers on time or faces frequent delays in settling invoices. This can help you assess the company's financial discipline and reliability as a business partner.
Risk identification: By analysing PPR data, you can identify potential financial risks associated with a company. If a business consistently pays its invoices late or exhibits a pattern of late payments, it could indicate cash flow issues or financial instability. This information can be critical in determining the level of risk you are willing to undertake in your business dealings.
Supplier relationships: PPR data can offer insights into a company's relationships with its suppliers. If a company maintains a good payment track record, it suggests that it values its supplier relationships and is committed to maintaining healthy business partnerships. On the other hand, a company with a history of late payments or payment disputes may indicate strained relationships or operational inefficiencies.
Benchmarking and industry analysis: PPR data can be used to compare a company's payment practices against industry benchmarks. This analysis can help you understand how a company's payment behaviour aligns with industry standards. It can also provide a basis for negotiation and determining fair payment terms, allowing you to make informed decisions during business transactions.
Financial forecasting: By examining payment patterns through PPR data, you can gain insights into a company's financial performance and liquidity. This information can be valuable when forecasting cash flows, assessing creditworthiness, or evaluating investment opportunities
PPR data can provide useful information to provide context when considered with other due diligence practices, such as financial statements, credit reports, and legal documentation. Combining multiple sources of information will help you form a comprehensive understanding of a company's financial position, their payment practices and their ethics.