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A unique predictive scoring model has been developed in conjunction with Scorex (UK) Ltd aimed at enabling you to detect those companies at risk of corporate failure within the next 12 months.
In developing the score, the database was split into two samples, those companies with a turnover above £1 million + and those below. The main reason for this was that it was felt that smaller companies especially those filing modified accounts, may well exhibit different characteristics to larger companies. We were to keen to develop a performing risk model which took into account all possible influential criteria whatever the size or business of the company. To this end, historical data was taken to identify the two sample sets - companies which had become involuntarily insolvent and companies which had continued to trade. Up to ten years worth of financial data was analysed to identify patterns and trends - ratios were compared against industry sectors, and county court judgements and audit qualifications were also taken into account.
The strongest criteria were then applied and tested against further random samples. At the end of the exercise a robust set of elements were firmly identified for building the new score calculation.
Quick reference guide to the New Score
The new score measures all companies against the proven criteria identified. As a rough guide to what the score means the following table provides a quick look up for assessing how any company ranks against the average risk rate.
| Risk Band | Score | % of Cos above band | Risk Band |
|---|---|---|---|
| Extreme Caution. Very high risk. Guarantees required with these accounts. | 1-20 21-29 |
(98.9) (96.9) |
at least lOx>than average rate at least 5x>than average rate |
| 30-35 | (94.0) | 3 to 5x>than average rate | |
| 36-40 | (88.9) | 2 to 3x>than average rate | |
| 41-46 | (79.3) | just above average risk rate | |
| Caution. Marked risk, ranging from: | 47-50 | (71.2) | average risk rate |
| a) companies with limited credit capacity | |||
| b) accounts requiring constant monitoring and measured exposure. | |||
| Normal. Limited Risk, normal terms can be granted to these accounts. | 51-53 54-57 |
(62.8) (53.6) |
just less than average risk rate half the average risk rate |
| Confidence. Very Low Risk, favourable terms can be offered to such accounts. | 58-63 64-68 |
(38.5) (26.9) |
2 to 3x less than the average rate 3 to 4x less than the average rate |
| 69-71 | (20.8) | 4 to 5x less than the average rate | |
| 72-81 | (6.1) | at least 5x less than the average rate | |
| 82-100 | at least 10x less than the average rate |
Credit Limit Calculation
The ICC credit limit calculation is linked to a company score by a percentage weighting which is automatically applied to a calculated average of balance sheet and cash flow values. The higher the score the higher the percentage applied. These weightings benefit from the discrimination of the score between good and bad companies. There are some companies that will not have a credit limit attached. These companies will have scored below 15 or alternatively all elements from the balance sheet and cashflow will be negative.
Credit Limit Period
The credit limit should be regarded as a yardstick for the possible level of acceptable credit, or alternatively the maximum amount one is happy to be owed by an applicant at any one time. It has no time period in consideration, it is advising an overall credit amount.
Contract Limit Calculation
Juniper contract limit represents the size of contract that a company can undertake. It is calculated by assessing performance in relation to the Juniper risk score and measuring this as a percentage of annual sales. An excellent measurement for assessing potential value for longer term contractual relationships. There are exceptions to this formulae which are industry specific.