When a vendor's financials have been inputted and calculations are run, benchmarking results are generated on the "Summary" tab. This article discusses how the system creates these benchmarking results.
1. Financial Metrics
TradeTapp offers 19 liquidity, turnover, debt, and profitability metrics by which all of your subcontractors can be accessed. A list of the financial metrics TradeTapp calculates and the definitions are available for review in the Financial Model settings within your account.
Each metric is benchmarked against other subcontractors with data for the same financial statement year. For example, ABC Mechanical’s 2018 financial statement Quick Ratio result will be benchmarked against all other 2018 financial statement Quick Ratio results.
The result is based on the subcontractor’s most recent financial statement and based on the subcontractor’s ranking against all other companies that have financial data for this year.
TradeTapp calculates the average value for the statement year, and then identifies the subcontractor’s benchmarking percentile based on how much the company’s result deviates from the average and whether it’s better to have a higher or lower result.
For example, if the average Debt Ratio is .55, a score of .98 will be flagged as performing worse than most subcontractors, and a .2 will be performing better than most companies.
Benchmarking Ranges
- Very Poor (red): < 30th percentile
- Poor (orange): 30th-40th percentile
- Fair (yellow): 40th - 50th percentile
- Great (lighter green): 50th-70th percentile
- Excellent (darker green): >70th percentile
If you have custom ratios, those will only be seen by your company, but the results will be benchmarked against all relevant subcontractor financial data in the network.
2. Financial Categories
Once TradeTapp calculates a percentile rank for each metric submitted by the subcontractor, then, those are rolled up into a category (liquidity, turnover, profitability, debt) rank by averaging all of the metrics in each category.
The result is based on the subcontractor’s most recent financial statement and based on the subcontractor’s ranking against all other companies that have financial data for this year.
The rankings are displayed as a percentile (0-100th ) for each category respectively.
3. Overall
Your company’s financial category weightings are applied to the subcontractor’s financial category benchmarking results to determine their overall benchmarking result. This is displayed as the percentile within the center of the benchmarking results.
The result is based on the subcontractor’s most recent financial statement and based on the subcontractor’s ranking against all other companies that have financial data for this year.
By default, TradeTapp provides a recommended blend which weights liquidity higher than others. This can be customized at any time within the Financial Model setting.
Want to learn more about risk assessment in TradeTapp? Download the TradeTapp Risk Assessment Overview.
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