SPEAKER_01: 0:00

This is the Empowering Healthy Business Podcast, and I'm your host, Cal Wilder. Each episode we'll dive into topics important to folks who want to run businesses that are both nicely profitable, sustainable, and scalable, and who want to achieve balance in their lives and realize their potential inside and outside of work. The show is sponsored by SmartBooks, provider of bookkeeping and accounting for businesses. Let's get started. Welcome listeners. I'm excited to be joined today by Brian Tudoff, who's going to talk to us about uh credit bureaus and how small businesses can extract value from them. Um it's not something that you know a lot of us in the small business space tend to spend a lot of time thinking about because I think historically we haven't found them that that useful. But Brian is trying to solve that problem to make them more useful for us. So welcome to the show, Brian. Great. Thanks you. Thank you. Thanks for having me.

SPEAKER_00: 0:58

I've really been looking forward to this.

SPEAKER_01: 1:00

So, Brian, I got to know you a little bit uh several years back when you were building a previous business called Tally Street, where you were kind of extracting and analyzing customer payment history and risk and patterns with QuickBooks data and trying to help people understand and and I think probably ultimately project risk and cash flow, right? And I assume that was um some of the some of the motivation for Truverto, but maybe you can briefly tell us the story of Tally Street and what got you started with Truverto?

SPEAKER_00: 1:33

Yeah, absolutely. So um Tally Street, yeah, the the inspiration for that actually was was a prior business where my background's not in accounting, it's in data and analytics and a lot of software startups. But a couple businesses ago, I started a liquor distributorship. So not a technology business. Um, but I was selling to bars, restaurants, liquor stores, and um and I wanted the same kind of information about my customers that I was used to having in more kind of you know software startup high-tech areas, analytics like lifetime value and churn risk and so on, right? And purchasing histories. Um and there was nothing like that for small businesses that was kind of affordable and quick and easy to use. So that was that was the inspiration for Tally Street. Um and in doing that, working with a lot of business, well, first of all, that went great. Like we had worked with uh lots of accounting firms um like SmartBooks, um, lots of small businesses, and it was later acquired by uh Rightworks, who provides a lot of um other services to accounting firms. Um but one that to get to Troverto, one thing I learned along the way when we were doing that is that the customer information a lot of small businesses had inside QuickBooks, for example, um, was not always, let's say, it wasn't always as clean as it could be, right? So if you think about some of those analytics like lifetime value, well, if you have a duplicate customer, customer in there twice, you know, their lifetime value is gonna look like half of what it should be, or you know, however, those payments get distributed. So uh we just ran into a lot of kind of poor data quality problems or you know, issues, things that could be better. And then we also saw businesses struggling with really understanding the kind of the credit risk of their businesses. And um, you know, as you highlight, it's kind of a tough problem to solve. It's been out there for a while. You know, the tools are a little lacking. So that's what we've been trying to set out and help with.

SPEAKER_01: 3:30

Awesome. Um, so in a nutshell, what um you know, what does Treverto do, or what do you what are you striving to do there for like functionally for small businesses?

SPEAKER_00: 3:40

Yeah, but so for yeah, for small and mid-sized businesses who we're really focused on B2Bs. So those companies who are those businesses who are selling to other businesses. Um we're helping them get the credit information and company information that um about their customers that they can use to improve kind of collections on AR, um avoid fraud, um, automate a lot of processes that used to be manual. Just basically make, I think of maybe this shows my age, but I think of this old BASF commercial, which was we don't make the products you use, make we make the products you use better. Um and there's a little bit of that, is that you know, businesses have the different tools they use and processes they use, and and we're not you know an AR tool, for example, but we want to make all those things better by making underlying data and information better.

SPEAKER_01: 4:31

Yeah, I can tell you from experience, you know, SmartBooks has worked with hundreds of small and mid-sized businesses over the years, and we they they really don't know the credit worthiness of most of their clients. And so we try to advise them to mitigate bad debt risk by collecting upfront payments and you know, suspending service if somebody falls too far behind. You're kind of operating blind to the data, so you're trying to use management practices to mitigate risk in the absence of data that could help assess that risk, right? And so I think the bad debt risk is one challenge that we face. And then the other one is kind of cash flow. We had a client that um, you know, sold picture framing, uh, picture frames and framing services. And, you know, for their, you know, consumer customers who'd walk into the store, they'd pay with a credit card, and there wasn't really much risk involved. But for their business-to-business customers, they'd invoice them on open payment terms. They had no idea how credit worthy they were, if they were really going to pay on time, and and their suppliers wanted to get paid in in 30 days. And so they had to go pay their their suppliers 30 days, and then some customers didn't pay them for 45 or 60 days or 90 days, and so they're fronting money and then hoping they get paid later. And so even if they got paid later and didn't have to take any bad debt expense, then um they were still taking the cash flow hit, right? And so I think both of those are are big challenges.

SPEAKER_00: 6:00

Yeah, absolutely. I mean, anytime, you know, in B2B businesses, especially industries like manufacturing or distribution, so on professional services, um, it's it's almost a requirement for sales teams to provide credit terms or for the business to provide credit terms in order to get some of those sales. Um and and exactly as you said, it's a basically it's a free loan. It's a free short-term loan to your customer to let them pay you in 30 or 60 days. And if you think about it that way, then you know you can start thinking about all the kind of risk problems, cash flow management problems, you know, that that other people associate or you know, have to deal with when offering loans of of some duration. Um and the the information out there has been limited. Um and even what information is available has been difficult to access or use. So it's it's um, yeah, I think a lot of small businesses have essentially self-insured. They just, like you said, they they take the risk without knowing exactly what it is. And the um the result is overall, businesses lose about 2% of their sales to bad debt. Um, and increasingly fraud. Um so overall, businesses now report losses of like 5% um because of fraud. Um so that it's you know it's a growing problem of not knowing a customer's credit risk or getting all the information kind of right about them and verifying or validating um who they are.

SPEAKER_01: 7:32

And I don't know very I don't really actually know any small business owner off top top of my head who actually fill you know submits financial information to credit bureaus. I mean, remember early in my career, like 20 years ago, I get all these calls from Dun and Brad Street salespeople asking me to sign up for a subscription or whatever, and I never did anything paid, but you know, at one point I did upload some financial statements to get a DB number and establish some credit history. I didn't, you know, I was 24 years old or something, I didn't know what I was doing early, but I kind of felt like I was wasting my time at the end of the day because there was nothing in it for me. Um right. So that was the challenge. If there's nothing in it for the business owner to spend the time keeping up with the reporting, they're just not gonna do it. But then the data's not there for them to use to evaluate their own customers.

SPEAKER_00: 8:55

Yeah, I mean, the credit score is really critical for a business and it kind of impacts everybody. I mean, if if you know a business themselves, um their credit score will impact the um you know the terms they'll get from their suppliers, right? Um it'll impact kind of uh the loan rates or interest that they'll get from from their lenders. Um and then the same's true in reverse. So it's um you know, it's a really important number. It's something or set of numbers, right? Set of information that everybody relies on, but it has been a little kind of opaque and and harder to deal with. I think uh maybe a little bit of the fun history of credit bureaus back when they started, if you go back to the 1800s, um, you know, even consumers, you'd go to the local grocery store or market, right? And they'd have a piece of paper and you'd buy stuff and they'd keep a tab. Um, and then you'd come and settle up at the end of the month or whatever. Um, well, then they started just the the vendors on the street would start to share information and say, like, oh, well, you know, Brian's owed me a few dollars for a long time. Like, you know, be careful. Um, well, then Dun and Brad Street actually got their start by doing that at scale, basically going around and collecting data from businesses really door to door, um, way back when, right? Um, and then it moved on, of course, to to online people submitting data. Um, and as you said, that's kind of been a um, you know, collecting the data is something that is it's funny you mentioned 20 years ago. It kind of the way it's done today, the way it has been done, still feels like 20 years old, 25 years old, and um and really contributes to people not contributing, right? And then everybody suffers as a result.

SPEAKER_01: 10:41

So maybe Brian, I I think most listeners are familiar with you know personal credit scores and what influences them and you know how that works at a personal level, but I'm pretty ignorant on how it works at the business level. So maybe give us a little background education on how how credit bureaus and credit scoring work for businesses.

SPEAKER_00: 11:02

Yep, yep. And there, yeah, it's a great question. There are a lot of parallels with consumer um scoring, but it's but it is obviously different. So really the bureaus tend to get information in in three primary ways. Um, one is comes from public data. So, you know, a lot of listeners have probably gone and checked somebody's um, you know, the Secretary of State in Massachusetts or Delaware or wherever to make sure that the business was properly registered and what information is there. And the bureaus do that too. So they automate a lot of that process by gathering public data. Um another thing is they do get credit data. So um, you know, a business's bank or their credit card provider will also report information. And the third piece that that's really important to this conversation, and and going back to the history of Dun and Bradstreet, for example, is gathering um what businesses pay each other, how well they pay each other. And that's what's really different than the consumer side. I mean, when you go out to a restaurant, right, you swipe your credit card, or you buy a picture frame, you swipe your credit card. The vendor, the supplier is not really extending you credit, the credit card company is. But when you chill go to a business environment and you're saying, pay me in 30 days, 45 days, 60 days, um, you're lending money. So that's a that's a hugely important um uh kind of component of a business's credit score that's unique to the business um space.

SPEAKER_01: 12:32

And so if I'm you know IBM selling to small businesses, I can afford to invest in systems to report to credit bureaus, I guess, on the payment history of my business clients. But if I'm a small business and I'm on QuickBooks, it's like very it seems like it would be daunting for me to you know compile the information if I were so inclined to report it to the credit bureau, right?

SPEAKER_00: 12:59

Yeah, it's even worse than daunting um for QuickBooks users, for example, because the credit bureaus require a certain set of information, and one of those is a customer ID. And when you do your customer export from QuickBooks, it doesn't include a customer ID. So like a QuickBooks user can't even go through the process in the old-fashioned way, right, to participate um as a data provider to one of these exchanges. Um so the pro but if you did, the process is very is is pretty manual. It's not the information's not um super difficult. It's the best way to think about it is it's your aging statement. So really what you're doing is providing an aging statement um to the credit bureau. And yeah, if you're a really large enterprise, you can automate that. Um, you know, you've got internal IT teams, developers, and so on, and you can build all that out. If you're a small business, that becomes more difficult or expensive. Um it's also interesting to think about it from the other side. Like if you're the credit bureau, you know, if you think about what we talked about earlier, if you're you're trying to collect information about how well businesses pay each other, you know, who are the good sources of that? If you're the credit bureau, you want the biggest businesses who sell to the most people because you get a ton of data with one effort, right? So a lot of small business information that exists inside the credit bureaus today comes from like staples, right? Because you're buying office supplies and all these small businesses are buying office supplies, and it's staples selling to all of them. So they're this really you know deep pool of data about small businesses.

SPEAKER_01: 14:42

Are there confidential confidentiality issues that would preclude some businesses from reporting on customers? I would think that could be an issue.

SPEAKER_00: 14:52

Yeah, no, good question. It's um, I mean, a lot will depend on the relationship or the you know the agreement a business has with their customers. Um but it's uh maybe to go in a little bit more into what actually gets reported, because it's it's not um, I mean, any financial data is sensitive, but basically what you're reporting is that you know, I sold to X business and um they owe me$1,000 and um they're on time, or they're 30 days late, or they're 60 days late. That's essentially what gets reported. Um you don't have to say what you sold, um, right? You don't have to provide any you know phone numbers or tax IDs or anything like that, right? It's just really here's a business and they owe me money. And um and they're on time or they're late and how late they are. Um and then when you report to a when any business chooses to contribute to a credit bureau, um, your contribution stays anonymous. So nobody else, no, you know, another business who maybe sees their score um won't know kind of who contributed what that might have led to that score, right? So it's it's in a consumer report, for example, you can download your credit report and you can see what your you know, what your bank said or what your credit card said, all that details in there. Um for these uh business payments, it's kept anonymous.

SPEAKER_01: 16:24

Yeah, and so for me who is by nature a little bit skeptical, I'm like, well, how how is the score determined if it's reported to me as like a high risk or a low risk or a medium risk? What does that mean? How many, how much data is there behind that? Was that just one vendor who got stiffed and gave a bad score and that's it? Or like, so how do you get comfortable that the uh the scores you get from the credit bureaus for businesses are are accurate and meaningful?

SPEAKER_00: 16:55

Yep. Um, well, so they all have um different policies, the credit bureaus do, but they won't compute or they won't um develop a score um or a DMB calls it their paydex number, right? The the number of of kind of how people pay on the how businesses pay on the invoices that they've been issued. Um they won't do it unless they have a certain number of of kind of contributions to compute that score. So one individual, you know, they won't release a score based on one individual um trade submission, right? Payment submission. So they'll want multiple ones. Um you know, like credit bureaus or like consumer credit bureaus, the algorithms are are part of their secret sauce. So not all that gets uh obviously shared. Um but if you think about it from their perspective, you know, if they're releasing scores that are not predictive and not helpful and not informative, then they're probably not going to be in business for very long, right? I mean, that's why people use them. So um a little bit of the kind of the proof is in the pudding in that um, you know, they exist, they're demanded by a lot of businesses because they do add insights and value into what otherwise could be a you know like a black hole, right? Of just a lack of information.

SPEAKER_01: 18:16

Yeah. And I suspect there are some industries where this matters a lot more than others, right? If you're a marketing agency and you've got a couple dozen clients and you know them and you know the owners, and you collect an upfront retainer, and you can just turn off service if you they are become too delinquent. I think that's one thing, because you kind of know your customer. And but if you're selling you know widgets online or something, you don't know your customers, they could place large orders. I guess credit management becomes a lot more important, right?

SPEAKER_00: 18:56

So what are yeah, I think of it uh like I said, I'm not an accountant, but I did study economics, so I I think of like the marginal cost, right? If the if the cost of what you provided was high, um that extra unit, um, then you care more. So, for example, like you said, if you you know, if you're shipping some widget, um, you know, some actual physical good, you've shipped it and you've delivered it, and you have absorbed the cost of making that thing, distributing that thing. And therefore not getting paid is not only a loss of revenue, but it's a loss of you know recovering the cost of that thing that you did. Um, I think the same's true for professional services. That's not a cost to goods sold, but it's a big operating cost. You you know, somebody spent a lot of time, a lot of hours providing some service, and then to not get paid for it is not only, again, a loss of revenue, but it's a it's a huge opportunity cost because that time could have been spent doing something else for which you got paid. Um, you know, where people can afford to take a little more risk or companies can afford to take a little more risk, or maybe some like a SaaS company, right? Where that subscription, that one extra subscription didn't really cost you that much. Right.

SPEAKER_01: 20:14

Correct, right. A dozen kegs of beer and the liquor distributorship uh costs you a lot.

SPEAKER_00: 20:20

Exactly. I mean, when I was a distributor, you know, the gross margins for a distributor are below 30%, right? 20%. So they're you know, they're not a lot. If you're out that keg of beer or case of wine or whatever it is, that that's actually pretty painful. So so yeah, I would say any, you know, any business where your your cost of delivering the product is high on an incremental basis, then then it that's kind of a double whammy, right? Because you lose the money and you're also out the the expense of that product.

SPEAKER_01: 20:52

Right. And from a know your customer perspective, if you don't really know your customers and their owners and anything about them, then being able to validate they exist, they're registered in good standing with the state, um, you know, potentially you could, I don't know, you could search and see if there are any lawsuits open against them or something like that. I mean, just kind of getting to know your customer, even apart from their credit history, you know, could add off some risk as well, I would assume. Absolutely.

SPEAKER_00: 21:21

So knowing all that, and um, you know, we can talk a little more about other ways to take advantage of credit bureaus other than just the credit score, but getting that kind of information, automating access to that information, um really saves a lot of time and reduces a lot of that, a lot of that risk.

SPEAKER_01: 21:40

Um this all sounds great if you could get you know the customers to um submit information, um ideally you know, financial information. But apart from that, if we're just looking at payment history, if you could get you know small and mid-sized businesses to consistently report, it would become you know like a flywheel. You know, it gets going, everybody's seeing the benefits, every, you know, you know, you're benefiting from the fact 10 other uh suppliers and vendors submitted the information on customers, and you're starting to overlap and build a database of small businesses that you can actually use to evaluate credit worthiness for your own customers, right? But right now, nobody has a lot of incentive or sometimes even ability to extract that data and submit it, even if they kind of wanted to, right? So it just seems like a challenge, chicken and the egg, right? Until there's a clear benefit to make the effort, you don't want to make the effort, right? Um and so you got to get some benefit for people that want to make that effort.

SPEAKER_00: 22:51

Yeah, absolutely. There it is. So it is a big chicken and egg problem. Um so if if you know it's a it's a collective problem, it's it's businesses, especially businesses within certain industries, right, helping each other by sharing this information kind of limited amounts of information anonymously. Um I think that's why the um there's other value to participating in one of these credit bureau exchanges beyond the credit score. So even if you're at a situation currently where not a lot of information is available about, say, one of your customers to give you really warm and fuzzy feeling about their credit score, there's other information that you can access as part of contributing. And some of it is back to that Secretary of State registration, official addresses, um information about your customers that can help keep that customer list clean, you know, avoid maybe somebody submitting a fraudulent, you know, invoice with delivery to a different address than products or you know, should be going to. So yeah, there is a way to um, and this is a lot of what we do at Traverto is um, you know, we make it super, super easy for people to contribute. So literally within about 30 seconds, right, you can you can connect Treverto to QuickBooks, and then you can start getting value from these credit bureaus and and decide which ones you want to you know increase participation with. Um and and get a lot of that information back just to, even without credit scores, before we can get to that again, um just to improve the quality of that underlying customer data.

SPEAKER_01: 24:37

Okay, so Truverto is becoming an intermediary between the business and the credit bureau, where it's extracting the information to make it easy to submit, so it's not a big undertaking to submit the data, and then in exchange you can get back data from the credit bureau in a form that's digestible for you. Is that is that the gist of it?

SPEAKER_00: 24:58

Yeah, previously it was a very manual process, which was which was bad for the business who wants to participate because it was something they had to do every month, they had to remember to do every month, they had to do it a particular way. If they wanted to work with two credit bureaus, they had to do it for each of them in their own particular way. Uh, but it was also bad for the bureaus because you know they have to ingest, you know, retrieve that it receive that information. And kind of like we said earlier, for them to work with a lot of small businesses is more expensive for them to work with a fewer large businesses under a manual process. Um but by automating it, all of that goes away, right? So now a business can contribute really at the click of a button. Um, and then because as that kind of intermediary, um, we're providing the information securely to the credit bureau, we make it more efficient for them to work with more small businesses because now they're getting it um always the same way, you know, the structure they want, the time they want, the cadence they want, etc. So it really um makes that entire process a lot more efficient and a lot more effective. And it's why we think it's just a it's it's a really great asset that small businesses are not taking advantage of that is literally free. It's well, it's a barter system, right? You're giving some data and you're getting some data back, but it it does not require subscription, it doesn't require writing a check, right? So it's it's just that participatory kind of collaborative um exchange that now for the first time is fully automated.

SPEAKER_01: 26:35

Well, you're trying to solve a big problem nationwide, if not uh internationally, right?

SPEAKER_00: 26:42

Yeah, and and really trying to help both sides because if you're if you're a business, you know, and this has happened a lot in the past, you you know, you want to improve your own credit score, just like consumers think about improving their own credit score. But in the business space, you really can't do it. Um, you know, you're the only way your story gets better is if your suppliers provide information about you. So you kind of you know, you want your best suppliers to tell Dun and Bradstreet and Credit Safe and others how well you're paying them because it boosts your score. Right? So this is kind of for for good actors, this is this is great news for them and helps them with their business. For bad actors, you know, maybe it and maybe it compels a little discipline, right? Because then they they see the impact of of um maybe some not so great business practices and it encourages them to improve those in order to get their score up and and um be a more reliable participant in the business community.

SPEAKER_01: 27:41

Yeah, certainly it makes it brings a lot more transparency to the space, right? If you're dealing with public companies, you can pull their 10Ks and 10qs from the SEC's website and do some quick analysis pretty easily on public companies to see if they're in financial trouble or not, um, and calculate their day's payable outstanding and a couple basic ratios easily enough. But if you're dealing with you know private companies, even really big private companies, you have no access to that kind of data.

SPEAKER_00: 28:11

No, not not at all, right? So um back to your chicken and egg problem, you know, the good news is that it's it's really easy and actually free to start at the basic level and start to get some information and start to be a um again a member or a participant in the community and and start to improve that transparency for for everybody else. And actually, if your your best customers will they should thank you for it, right? Because you're you're basically improving their score by providing that information. You're making it easier for your best customers to get good credit terms from their other suppliers that they might buy from in other industries, um, bank loans. And you get into things like factoring and asset-based lending. I mean, there are other areas that get more kind of technical and complicated where this stuff really matters and and you're doing your customers a big favor um by providing it.

SPEAKER_01: 29:11

Yeah, I'll tell you that's a good point because you know business owners get to a certain age and they get tired of personally guaranteeing things and you know agreeing to put a lien on their house and things like that, and they just want to stop doing that. And you go to a traditional lender like a bank, you have to do that. SBA loans, you have to do that. So we have clients that go to factoring companies or more expensive, but uh, you know, non non-bank lenders where they don't require personal guarantees, but the interest rate can be a lot higher. And, you know, the the lenders may have access to some data, but not great data. Um, and so I think kind of outside of the traditional bank lending space, this could be really helpful in kind of differentiating folks with good credit from bad credit and making it cheaper to borrow and factor for folks with good credit.

SPEAKER_00: 30:00

Yeah, 100%. I mean, you mentioned transparency a while ago. And um, you know, the more transparency you have, the more you lower risk. The more you lower risk, the you may the more you make those kinds of things less expensive, right? Because if the risk is high, then lenders, suppliers, right, they add a risk premium to any interaction with you. And if we can collectively lower that risk, then operations get less expensive for all of us, right? Funding our companies gets less expensive. for all of us. So it it really, you know, it takes a village. But but there's, you know, there's a great way to get started. And then as we've seen with a lot of kind of newer technologies, the network effects, right, to use that kind of buzz term, start to add up really, really quickly. How many major uh business credit bureaus are there now? Who are they? So good question. So Dunn and Bradstreet is the one probably everybody knows. They've been around for, I don't remember, 180 years or something, a long time. And the Dunn's number, the Dunn and Bradstreet number, is kind of a de facto ID for companies. Right? A lot of listeners have probably submitted a credit application and had to provide their Dunn's number on their credit application. So that's the biggest one. But it's become more competitive lately. So there's another credit bureau named Credit Safe who got their start in Europe. You can kind of think of them as maybe the DB of Europe who's now building their presence in the United States. Experian of course maybe more better known on the consumer side also does business credit scoring. And then Moody's who a lot of people think of Moody's as the you know the rating agency for public companies and bonds and things but they also have a uh a division that does um credit scoring and reporting so those are really the big four um less well known are there are a lot of groups out there. There's a group called the National Association of Credit Managers that has regional chapters around the country and businesses will participate in that. There are other industry focused groups so you know I think the world we're trying to help or the thing we're trying to help businesses do is take advantage of all of these, right? Because if you automate the process you don't have to pick one of those four or you don't have to pick one of those um regional groups. You can participate in all of them and then you can use the combined information you get back from all of them to really have the best source of data possible to help you know your customer. We call it a golden record.

unknown: 32:47

Right.

SPEAKER_01: 32:47

So Treverto is really consolidating all that data in one place. So you don't have to worry about asking four different credit bureaus for the data you just go to Treverto and get it.

SPEAKER_00: 32:56

Exactly. So you know in one situation maybe CreditSafe knows more about one of your customers and then for a different customer maybe Dun and Bradstreet knows more. We'll always combine them so that you have the best set of information for each of your customers.

SPEAKER_01: 33:13

And so is Treverto you know launched and live and people can go start using it or kind of where is it in the development and go to market at the moment?

SPEAKER_00: 33:23

Yeah thank you so we'd we in the last month we've launched on on the first two platforms first two accounting kind of platforms and integrations so it's available for QuickBooks online. You'll find us anybody can find us in the QuickBooks store well in the US anyway. So right now it's limited to the US but in the QuickBooks US store uh you'll see Terto. Getting started really takes like 30 seconds. All you have to do is for anybody who's added another app to QuickBooks they'll be familiar with the process. Super easy the second um accounting platform or ERP we support is Microsoft Dynamics Business Central. Also really easy to get started a few minutes instead of a few seconds but but you know the same kind of concept so all a so that's where we are today. We have a special integration with Credit Safe so anybody who starts to use Treverto today even before you start to decide you want to contribute information say to a bureau you'll get some limited information from Credit Safe for free. I mean basically obviously as an encouragement to participate and do more. But that initial you know call it teaser data and kind of freemium model gives people some basic risk scores and company information at no charge so they can get a better sense of how valuable this data could be and how it would help them. And then from there they can start to add on kind of other credit agencies and other experiences.

SPEAKER_01: 34:59

I submitted a customer list to you and you came back with um some validations of email addresses and I think maybe state registrations and couple other data points and kind of a a basic low, medium or high credit risk from credit safe. So I thought that was kind of interesting um especially if I didn't know my customers very well it'd be helpful to at least be able to validate who they are they're in good standing and you know credit safes at least basic assessment of their credit worthiness.

SPEAKER_00: 35:34

Yeah absolutely um and then to track that over time. So it's you know it's one thing to know what their their kind of profile is today but then to track changes. So if you see somebody go from you know high to medium or medium to low or low to medium right those are strong signals. If you see a customer's credit risk we've talked a lot about uh credit risk as a a fear factor right like they might not pay me um this is something I need to worry about I try to encourage people to look at it from the other side too like let's somebody let's say somebody's credit risk goes from medium you know risk to low risk right so they're a that would suggest their business is improving that might translate into a sales opportunity. Focus your sales and marketing on you know good customers that are low risk right exactly so if somebody's credit score is actually getting better then um you know that might be another resell or upsell opportunity is that business is growing and being more successful. So it's um yeah we often you know we talk about credit bureaus and we think about the risk but even you know just as important I guess is the the upside opportunity of using the same information to boost um sales and customer engagement.

SPEAKER_01: 36:49

So I'm hearing a lot an increasing amount about fraud and I did an episode a couple episodes back and we're talking about we thought we were going to talk about general general bank fraud and payment fraud and ended up being a lot of talk about crypto and crypto fraud but um you know there's a lot of especially AI makes it so easy to impersonate people you can send off a letter that says our payment address has changed or a bank account has changed, uh start sending your money this new place. And if I'm kind of a low-level accounts payable clerk at a business that's like oh this looks like routine it looks like it's on the the vendor's letterhead we pay them something every month I'm just going to update their address or their bank account information the system because it seems like no big deal. And then all of a sudden you start sending money to a fraudster and it disappears and you can't get it back. And you still owe the money to the reg the correct vendor anyway, right? So I'm curious how how we you know how Troy Joe could potentially mitigate that kind of risk.

SPEAKER_00: 37:45

Yeah yeah no great question and it reminds me kind of a funny story. Like did you ever see the movie um Catch Me If You Can Oh yeah with Leo Caprio Frank Abingdale I think if I've got his name right um that's who it was based on he wrote a book about it. It's a real story or at least inspired by a real story. And um I recently saw him at a National Association of Credit Managers conference like presenting. So after that experience and he went to jail for it um he then turned his life around in in dramatic fashion and has been training FBI agents you know for decades um about fraud and he gave a presentation and talked about um you know some of the things fraudsters do and the way they're using AI and it is uh you know it's kind of shocking uh right how quickly things are changing and how quickly they're progressing. And um one thing they did in the room is they asked and the room was full of credit managers and they asked um how many of you have have experienced an increase in fraud in the last year and probably 75% of the room raised their hand. Right? So it is it is increasing significantly it's getting more sophisticated it's a lot harder to tell um you know especially on your own what's accurate and what's not um and it's not it's not just somebody creating a fake company it could be somebody who's found a way to impersonate one of your existing customers. So you think this is you know you've been selling this person for a while and this is great. And oh they must have opened a new office because this is a new address but I'm sure it's okay right and and they'll find a way to to be super convincing right and before you know it you've you've um shipped product off to the wrong you know to some place that you later find out is not actually your customer and it's gone right and um that's happening at an increasing increasing rate.

SPEAKER_01: 39:43

Yeah so I guess validating names and addresses at a minimum would be a good place to start and if there were any way to validate you know bank accounts since we're the US still does a lot with paper checks but we're increasingly moving to digital payments so if there's any way to validate names and addresses and and bank account number banks and bank account numbers that would be incredible.

SPEAKER_00: 40:05

Yep yeah but as you said a good start is is just you know going back to the discussion about credit bureaus is um even without getting to the credit score one thing they provide is address valve verification right including branch offices right and subsidiaries so knowing that relationship between different parts of your customer and which locations are true locations or not is great information to know when trying to catch potential fraud um even without having to wonder about credit scores or payment terms, et cetera, right? So it's back to your chicken eddy problem that you brought up earlier that's kind of a you know an immediate kind of valuable way or a way to get value um as you get started and then continue to grow and and do more from there.

SPEAKER_01: 40:57

How deeply are you planning to kind of embed into QuickBooks and other accounting software versus just kind of have a dashboard that you can view and manage within Troverto?

SPEAKER_00: 41:08

Yeah no good question I'd love to get feedback from you know from you and other clients because one thing we've you know in the last company we talked about at the very beginning with TallyStreet kind of the real value in TallyStreet was we we integrated with um CRMs as well as accounting systems. So we could take information we learned about customers and then put it into HubSpot right or put it into Salesforce and and people call that enrichment right you're enriching the customer records in those sales and marketing systems. And we think there's there's a great opportunity to do the same thing in accounting systems right QuickBooks now supports custom fields. I mean there's ability to go in and make what's in the accounting system the customer records in the accounting system not only more accurate but smarter by enriching it with extra information. And I think that's that's something we want to see more of is is creating those customer master records that are valuable not only for the accounting team and the finance team but that sales teams and marketing teams will also find valuable and useful right so it lets the it lets the accounting team and the accounting data play a more important role in the overall success of a small business. Right, right. I mean I assume you could do a lot of cool stuff within Traverto dashboards that might be hard hard to replicate if you have to do it in five or ten different accounting software yes yeah yeah we also you know with the experience with Traverto is you do get a dashboard you get a lot of analytics in the dashboard all the way down to the customer level you can manage all these engagements with credit bureaus as you want to as you select them but we also we're big believers in I don't know call it like the democratization of information right we want to we're not trying to hoard it inside uh Traverto or inside a dashboard we want to get it out into the other places where businesses can find it useful. Right. For example putting it back into QuickBooks.

SPEAKER_01: 43:03

Yep yep or whatever CRM systems salespeople are using to try to head off bad sales or e-commerce systems that are taking orders and trying to flag bad orders and things like that.

SPEAKER_00: 43:14

Yep yep we see more businesses using um things like Power BI as a way to do more reporting, you know, get information out of different systems. So I mean that's another example where the information gets pushed into um you know Microsoft OneDrive or maybe it's Google Drive right in ways that it can be better shared and used for for analytics and customer reviews and things like that.

SPEAKER_01: 43:36

So what's your longer term vision for Intraverto what are you you know we're talking general what you're trying to accomplish and tactically some of what can be done now but like over the next five or 10 years what's what's your vision for the business?

SPEAKER_00: 43:48

We're really focused on customer intelligence right so we we want to help small businesses small and mid-sized businesses we're not focused on um you know Fortune 500 companies or global 5000 companies but we really want to help small and mid-sized businesses have better more accurate information about their customers um a lot of that will come from their own data right so a lot of the analytics come from just better analysis of the data that's already in uh that SMB systems but then it also comes from the smart addition of you know third party data from places like trusted sources like credit exchanges uh credit bureaus um so our goal is really to our our long-term kind of vision or objective is really to to be that customer intelligence layer at a business um where we help them know kind of as much about their customers as they can and be able to use that as effectively as possible again not only within accounting but across sales marketing you know customer support um to make their businesses more successful you know I can think of a simple piece of data that would be awesome to have in QuickBooks which would be you know average days to pay for customers like if somebody asks about me about you know customers average days to pay I'm like that would be like a major project to go calculate that across their customer base is not easy but I assume you can just make that automated extract the data crunch the numbers or potentially plug it back into a custom field. Yep we we already provide that today so today you can get um Troverto will already tell you the average days to pay across your entire customer base but also for every individual customer and with trending information right so you can see how that's changed over time and and who's getting better and and who may not be and then when you bring in the credit bureau exchanges then you have you have the average day to pay across your whole entire customer base you have the average days to pay for each individual customer of yours and then you also know how long each of your customers takes to pay other people and and that's really useful information because you might find out that you know maybe your credit terms aren't that competitive or maybe they could you could you know be a little more flexible right or maybe you could give them more credit or less credit right so it's that extra information becomes hugely valuable for managing your own kind of AR and collections but again also the sales process.

SPEAKER_01: 46:26

Yeah I remember my in my first business I'd sit down with my controller every week and look at the AR aging and talk about collections and credit risk. And you know he'd say like oh don't worry they always pay in 45 days so it's not a big deal. I'm like well I have no way to verify that. So I'm just kind of trusting but I can't verify it. And so I was just kind of nervous about the whole situation. But it'd be great if I could could see okay here's the average days to pay here's the trend over the last 12 months okay this customer does pay in 45 days most of the time and it's pretty stable. So although they're 40 days outstanding now I don't think that's a big deal. Versus somebody who typically pays in 20 days and now all of a sudden it's 40 days, it might not look like a big deal but now they've doubled their time to pay.

SPEAKER_00: 47:10

Yeah I mean from a risk perspective that's why that trending exactly that's why that trending um is so important right to see those changes. And I, you know, at the very beginning you talked about cash flow and managing cash flow. Well if you know each individual customer's average days to pay you can do a much more reliable cash flow forecast, right? Because of all the invoices you have open you now know when each of them is individually kind of likely to come in and and that adds some predictability to the business.

SPEAKER_01: 47:42

Yeah and if you don't have a big cash reserve or you're having some cash flow problems that's very painful right now and you're trying to prioritize who to pay and how much to pay and what might be collected over the next week or two but you're just kind of guessing. But I think you could probably much more accurately predict cash inflows with days to pay type information. Absolutely so um anything else Brian you want to you want to mention before we wrap up no I think this has been a fantastic conversation.

SPEAKER_00: 48:15

It's thanks for the opportunity to to kind of be here and um hopefully help share some information about um you know ways that small businesses can take advantage of extra customer information that maybe they didn't really know about or you know thought it was going to be harder than it than it is right than it is in using today's tools and techniques.

SPEAKER_01: 48:37

Right. So if uh listeners want to try this out check it out um what's the thing they do? They go to the QuickBooks Marketplace if they're on QuickBooks or they go to the what whatever the equivalent is with Microsoft Dynamics.

SPEAKER_00: 48:48

Yep you have three good options you can come directly to the Traverto website um and um and start there. There are also some articles you know to kind of learn more before you make a decision to to kind of get started. So the Traverto website's a great place to go the onboarding process will walk you through everything again it takes like seconds to minutes. The other two places are yes you can go directly to the QuickBooks app store or if you're Microsoft you can go to Microsoft App Source their app store for Business Central and um and those are also really easy places to to get started. So those would be the threat the three best options the Traverto website QuickBooks or Microsoft.

SPEAKER_01: 49:28

Great well thanks so much for joining us Brian and sharing this information it's certainly been a little eye-opening for me because you know small and mid-sized business credit reporting is something I just haven't paid much attention to because I haven't felt it's been very useful but I can a hundred percent appreciate how with Traverto um automating and you know providing those insights it's gonna be could be tremendously valuable.

SPEAKER_00: 49:51

Right. Well thank you again for having me and thanks for some of the you know the stories and the experiences that um you know that you shared that really kind of highlight the opportunities here.

SPEAKER_01: 50:01

Sure. Well best of luck with everything Brian thank you. So this has been another uh hopefully exciting if not exciting then at least an educational and thoughtful episode of the Empowering Healthy Business podcast. Talk to you all next time another episode in the books thank you so much for tuning in for show notes and more visit empoweringhealthy business dot com. If you would like to have a one on one discussion with me or possibly engage smart books to help with your business you can reach me at cal C A L at Empowering Healthy Business dot com or message me on LinkedIn where I am easy to find. Until next time this is Empowering Healthy Business the podcast for business owners signing off