Creditreform Rating | with Stephan Schütrumpf

In this interview: Stephan Schütrumpf, Creditreform

Empower clients for loan negotiations now: In Opti.Tax, you can prepare a client’s annual accounts in just a few clicks obtain a credit rating. Paul Liese discusses this topic with Stephan Schütrumpf, a member of the executive board at Creditreform Rating AG.

Paul Liese: A very warm welcome, Stephan Schütrumpf. Why don’t you briefly introduce yourself – tell us who you are, what you do, and why you’re here.

Stephan Schütrumpf: My name is Stephan Schütrumpf. I have been employed by Creditreform Rating AG since 2003. I am now 46 years old. I am an authorised signatory for the company and, amongst other things, have also been the managing director of CR Services in Bulgaria since 2015. I’m delighted to be here today. It’s a completely new experience for me too, taking part in a live stream like this. Yes, we’d be happy to discuss the new product here.

Paul Liese: Yes, exactly. We first got in touch with Dirk Siegel from Creditreform Hamburg in May to discuss balance sheet reporting and financial reporting, and then he put us both in touch with each other.

Stephan Schütrumpf: Exactly. We then got in touch. Dirk sent an email saying: „Paul has annual accounts for us via Creditreform.“ And as we’re experts in processing annual accounts data and are always on the lookout for new channels from which to source annual accounts, we had a phone call. I thought it was brilliant how quick and straightforward the whole process was. As you said, we spoke in the middle of the year and today we’re sitting here with a finished product that we can even showcase.

Paul Liese: Exactly, we’ll jump straight into our software in a moment and have a look at it. What’s special about this is that we’re providing you with data based on XBRL. That means it’s already available in the field of Electronic balance sheet. That’s where we all come from. This is the case in the field of Publication in the Federal Gazette. It all started with last year’s digital financial report, or rather the one from 2017. And we’re using the same framework for you. What do you do with the data? Or what helps you to use it on the basis of the taxonomy?

Stephan Schütrumpf: The issue of media discontinuity has certainly been a recurring theme in recent years, particularly in the financial sector. That is precisely why the Digital Financial Report was launched. And we are trying to obtain and process data, ideally without any manual effort. If you receive an annual report as a PDF today and have to restructure it, that takes time. And that’s why we’re so keen to make use of the Digital Financial Report, as well as your interface, so that we no longer have to enter this data manually. The advantage for the company is that we can incorporate the data into our Creditreform business credit reports; this is a very, very important aspect of financial communication. If we take the example of a master baker who might want to lease a new vehicle, he can assume that one of the leasing companies in Germany will check his Creditreform business credit report. And if the creditworthiness index – which is displayed there as a measure of creditworthiness – is not within a favourable range, the master baker may not be granted a leasing contract. We repeatedly urge companies to maintain open financial communication and to provide Creditreform with the relevant information – ideally, of course, in a smart way, without too much effort. This is precisely the point: that we can process the data quickly in order to carry out a reliable assessment. After all, we are in a situation where, whilst we can always obtain annual accounts from public registers, if we are dealing with a non-corporate entity that is not legally obliged to publish its annual accounts, this naturally helps us enormously to make a much more informed assessment.

Paul Liese: We’ve now integrated two different products of yours into our software. We’ll come back to that in a moment, and then perhaps you could explain what each one is and what the specific benefits are for individual customers. The issue of media discontinuity is one where we, as software developers, have realised that the concept of an e-balance sheet from 2011 offers much greater potential, and that it’s becoming far more interesting and smarter to base all this financial reporting on XBRL. And that’s why it was a logical step for us to get in touch with you via Dirk Siegel, to push this issue forward and see what you think about it. I’m really impressed by how quickly we’ve implemented this in conjunction with Opti.Tax Release 20.0, which we’ll be presenting and releasing in the next few days, and on your side, the interface – which I believe will be released in January or February – so that, for the first time, a balance sheet rating can be obtained for you using our software for the 2019 annual accounts. And what’s also absolutely brilliant is that I get a response within seconds.

Stephan Schütrumpf: Brilliant, isn’t it?

Paul Liese: So either my annual accounts are absolutely dreadful, or I’ve got a brilliant result and can hang it on the wall and then talk to my suppliers about the need for better payment terms.

Stephan Schütrumpf: I’d be delighted.

Paul Liese: I don’t think you’ve seen this yet, have you? I’ve got my project management system here. I’ve set up a project here: the annual accounts based on Taxonomy 6.0. I’ve got the 2016 annual accounts as a demo module. We’ll be showing in a livestream in early January how the data is fed into our software. So this isn’t actually part of it just yet. We don’t want to bore anyone just yet; instead, we’d rather build up the anticipation so that everyone can look forward to January, when we’ll show how the trial balances are fed into our software, how the data is structured so that it can be sent to you at the touch of a button. I’ll open the project now. Here in the top right-hand corner I have my trial balance; here I have my live reporting, where I can then display the balance sheet, assets, liabilities – everything side by side. When I’m working on the annual accounts, I can also view the complete structure here to see what it looks like. I’ve organised my profit and loss account, my net profit for the year and everything of that sort together. And once I’ve finalised my complete balance sheet or my annual accounts, including the notes and management report (which I enter down here), I now have a brand-new button at the top of the software called „Creditreform“. And another brand-new feature in our software is that is that we can now generate the submissions for the Federal Gazette, the Digital Financial Report and the e-balance sheet directly from the annual accounts. So, regarding our product – which we launched in 2011/2012 and where we initially focused primarily on the e-balance sheet – we can now say, we first prepare the annual accounts in our software, and then the e-balance sheet, the disclosure, the Digital Financial Report and the Creditreform handover are simply a “by-product“ – that might not be quite the right word, but it’s simply much easier. Once I have the annual accounts based on taxonomy, I can provide information for all other financial reporting requirements much more quickly than if I were working at the general ledger level, where there’s a break in the data flow and I’m constantly having to convert something.

Here’s how the dispatch process works: I click on the button, and then the dispatch dialogue box appears. And this is where we come to the two different products I can book with you. Let’s start with the first topic: the first item here is „Credit check“. What is that?

High level of interest: obtaining annual accounts and processing them in the business information service

Stephan Schütrumpf: We did, in fact, enter into discussions and considered how we could work together and what our interests are. One major interest is in obtaining the annual accounts and then being able to process them in the business information service. We know how difficult it is for a business owner these days to disclose their financial information. The credit assessment is, in essence, a small token of appreciation for the company. Namely, if they provide us at Creditreform with their annual accounts, they receive, as a thank-you, a credit assessment based on those accounts, along with an overview of key figures and industry averages. They also receive a very concise, one-page summary explaining how individual key figures should be interpreted, which they can then use in their financial communications. The advantage for us is that we can now process the data in the XBRL 6.0 format. This means that when we receive the data, there is a mapping to our data structure – we use XBRL ourselves, after all – and we are then able to generate a rating in “real time“. In this case, that is the credit assessment, which we then return via the interface.

Paul Liese: There’s a slight link involved here. I only receive the credit check if, as a business owner, I agree or authorise you to use the data in the business credit report.

Stephan Schütrumpf: Exactly. That is the prerequisite. That is why he must also confirm once again that he is aware that this data will in fact be used by Creditreform and published in the Creditreform business credit report.

Paul Liese: Right, so that means: I don’t have to do that; I can still pass the information on to you, but I won’t get a bonus in the form of a credit check in return.

Stephan Schütrumpf: Exactly.

Paul Liese: Right, so I’ll get a little reward if I do that. Then we’ve got a second topic; it says here „Creditreform Balance Sheet Rating“. What’s that?

Stephan Schütrumpf: Think of it this way: the creditworthiness check is, once again, a by-product of our Creditreform balance sheet rating. The process is essentially the same. Here, too, we receive the annual accounts and process them. And how we then structure the product is always determined in consultation with our partners. As I said, the free version is a somewhat simplified version. On a single page, we present a concise overview of the balance sheet creditworthiness, categorised into five classes. We use the Creditreform Balance Sheet Rating to facilitate discussions with the bank; in other words, it gives the business owner the opportunity to discuss matters with their bank. They receive a rating result with the corresponding probability of default. In this product, too, they are shown the key figures we currently use for the rating; they receive explanations of the rating, industry benchmarks for the rating and the accompanying report, and simply have a much more comprehensive document to hand, which they can then actually use during their meeting with their bank adviser to say „You’ve assessed me; I’ve now had myself assessed as well – let’s compare the results“, thereby making it easier to strike up a conversation. Even in the run-up to a meeting with the bank, they can already identify where their weaknesses might lie – including in terms of their balance sheet. We provide important insights in the balance sheet rating report and believe that we can offer companies genuine added value in this regard.

Paul Liese: I’ve already had a look at one of the templates that our software generates following the tests: I can also see an industry comparison – how my company stacks up against the rest of the industry in terms of the individual key performance indicators, or whatever you want to call them. One more point – I’m not sure if I’m allowed to ask this: the product through which you can obtain a balance sheet rating has been available for some time now. It does, of course, come with a price tag. Is there an advantage for business owners in using the digital interface here?

Stephan Schütrumpf: Yes, there is an advantage there. The balance sheet rating, as it stands, is priced at €549.00 as a recommended retail price. However, if we are permitted to publish the data, we are allowed to set the price at €249.00. If the business owner says, „I’d like to have a look at the balance sheet analysis, but I don’t necessarily want the data published by Creditreform“, then the price is €299.00. And we believe this also makes the product particularly attractive.

Paul Liese: So, for me as an entrepreneur, there’s an advantage in sending it digitally straight away, rather than sending you my annual accounts in PDF format by email for the rating.

Stephan Schütrumpf: Exactly.

Paul Liese: Right, let’s move on to the next step in the dispatch process. Let’s tick the box here to indicate that we want both. I’m now seeing our Crefo number displayed, as well as confirmation that my client number and so on match your records. I’ll confirm that this is indeed my company. I’ll also include here what I’m sending you: the general information (covering my company, who I am, the balance sheets and the profit and loss account). If we’d also updated the notes to the financial statements and the management report, you’d see those too. This on the right-hand side is the PDF generated by our software. If I were to receive a PDF from an auditor as the annual accounts, I could also make that available to you here, as our software wouldn’t generate this PDF in that case. After all, we’re sending you two different data sets. We can see that here in the next image. This is the PDF generated by our software, which could also be the PDF from the auditor or tax adviser, and this on the right is what we technically send to you – and here I can actually check once again what information is being transferred by, for example, searching for ‘machinery’ and seeing: €40,000.00 in 2015, €32,900.00 in 2016. This means I can quickly check here once more exactly what data is actually being sent out, both visually and technically.

Stephan Schütrumpf: Great.

Paul Liese: Then I’ll tick the box to indicate that the PDF version I’ve linked there and the technical data go together. Now I just need to briefly specify who the data provider is, who the invoice recipient is for the service being commissioned, and then tick a whole lot of boxes – we won’t go through all of that now; these are the legal matters that have simply become necessary.

Stephan Schütrumpf: Data protection sends its regards.

Paul Liese: Exactly. Then send it. And if everything goes to plan, we’ll have a successful transmission to your data centre in a moment. And we can already see that the documents have been returned, both for the rating and for the credit analysis. Now we can also see what we’ve received back. We now have a new view in our software called „Documents“. In the ‘Documents’ section, we can still see what we’ve sent – the report – but what’s really interesting at the end is the balance sheet rating that we’ve received back from you. If we scroll down a little, we can clearly see the trend in balance sheet creditworthiness. I can see how the whole thing looks on the following pages. But this is your product, so you can try it out for yourself here if you’d like.

Stephan Schütrumpf: Certainly. Let’s move on to the key figures. These essentially form the basis on which we then compile the rating. In this report, we have around 30 key figures, which are highly standardised but also relevant in banking practice. So we haven’t invented anything new; rather, we’ve drawn on our many years of experience to identify the set of key figures currently used in practice. That is why we’ve included 30 key figures here. As you can see, individual key figures are highlighted in blue. These are the key figures relevant to the rating. This is because, in a system like this, one does not necessarily process all 30 key figures today – as that is not required – but rather limits oneself to individual key figures. We then want to make these transparent as well. That is why we have highlighted them in blue. We have then displayed the corresponding years. In this example, that’s 2015 and 2016. You can view up to five years in the report. A total of four results are displayed in the results section. „WZ“ stands for ‘economic sector’; these are the industry averages you just mentioned. And so you can see relatively quickly that we have an equity ratio here of 14.85, which – compared to the industry average of 17.13 – – is lower, and this also gives you an initial indication of how your own equity ratio compares to that of a relevant sector.”.

About the equity ratio

In addition to the key figures, we also provide an analysis over time – in other words, a cash flow-based perspective on the subject. Here, too, you can essentially gain an overview of your financial situation quite quickly and efficiently. In addition to the cash flow statement, we’ve also included charts in the report. Here, we’ve not only shown the industry averages, but also how the macroeconomic average compares across the individual key figures. I’d now like to return to the equity ratio. This is particularly interesting because, as I believe everyone knows, a ratio of 20 % – 25 % is considered a very respectable equity ratio. Here, one can even see that the company is already in a weaker position compared to the sector and that, across the sector as a whole, its equity base does not fare well either.

Towards the end, the explanations of the individual key figures are also very important, so that even readers with no prior experience can understand how the equity ratio is calculated, as well as the other key figures that are then shown alongside it.

Paul Liese: I’ve just noticed we’ve still got an umlaut error here: the Ö and Ä are missing everywhere. Oh well, we’ve still got a few days to sort out the bug. But you can definitely see what’s coming. I reckon this is an extremely effective tool for communicating with anyone who’s interested in my figures, isn’t it?

Stephan Schütrumpf: Exactly. And the great thing is that we now also want to add the following: if, in our view, a company has a good credit rating, it will also receive information on whether it might be eligible for CrefoZert. CrefoZert eligibility is a seal of approval that we only want to – and are able to – award to very select customers, namely those whose creditworthiness meets the relevant criteria. One criterion is that the balance sheet rating must be at least CR7 or better. In addition, we also take the Creditreform creditworthiness index into account. This must be at least 249. We also pay a visit to the company’s premises to complete a further questionnaire, so that we can incorporate qualitative factors into the analysis. And if all the criteria are met, we award the company a seal, which it can then display to demonstrate its creditworthiness.

Paul Liese: Fascinating. Well, that’s all there is to it. So, as I said: follow us on social media in early January, and you’ll find out the date when we’ll be showing you how the data is fed into our software so that we can ultimately send it to Creditreform. Thank you very much, Stephan, for joining us.

Stephan Schütrumpf: I’d be delighted, Paul.

Paul Liese: How did the first livestream go?

Stephan Schütrumpf: I was a bit nervous, but I think it went quite well.

Paul Liese: Yes, I agree. Ultimately, it’ll be the people who give us a thumbs-up on our YouTube channel and on Facebook who’ll judge that. We’re delighted with every ‘like’. We hope you have a lovely afternoon, and we’ll see you at the next livestream.