Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or...
Reexamination Certificate
1999-08-30
2003-03-18
Weiss, John G. (Department: 3629)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Reexamination Certificate
active
06535856
ABSTRACT:
BACKGROUND OF THE INVENTION
1. Field of the Invention
The invention relates to systems for regulating and enforcing open account payments. More particularly, the invention relates to methods and software for dynamically regulating and enforcing open account payments and for dynamic updating of credit ratings.
2. State of the Art
Business-to-business sales transactions are based on oral or written agreements between the buyer and the seller dictating the terms of the sale, e.g., the purchase price, the delivery date, the date by which payment must be received. It is common for the seller to extend credit to the buyer so that payment is not due until some time after the delivery of goods or services. This line of credit is often referred to as an “open account trade credit” or simply an “open account” and usually works well between regular trading partners who have established credit worthiness. In commerce between a buyer who is unknown to the seller, trading with an open account incurs substantial risk on the part of the seller. The risk is essentially related to the buyer's ability and/or willingness to meet the payment terms of the sales agreement. For this reason, there are many commercial credit reporting agencies such as TRW, EQUIFAX, and Dun & Bradstreet which provide information about the credit worthiness of businesses. Nevertheless, when dealing with an unknown buyer, the seller must undertake to obtain credit rating information about the buyer, analyze the information, decide whether to deal with the buyer, and adjust the selling price based on the degree of risk which is expected based on the credit report.
U.S. Pat. No. 5,732,400 to Mandler et al. (“the '400 patent”) discloses a system and method for enabling on-line transactional services among sellers and buyers having no previous relationship with each other. The system includes a financial clearinghouse for receiving a request for goods or services from a buyer and making a real-time determination of a risk classification of the buyer utilizing an on-line repository of credit information. The financial clearinghouse determines a risk-based discount fee as a function of the buyer's risk classification in order to establish a payment amount to the seller from the clearinghouse. If the transaction is authorized by the financial clearinghouse, the financial clearinghouse transmits the payment amount to the seller and transmits an invoice to the buyer for the purchase price of the transaction. The system can also include a broker coupled to the financial clearinghouse for providing an on-line order acceptance and processing capability between the buyers and sellers. The system attempts to facilitate the process of credit analysis and pricing based on credit worthiness. It does not reduce the risk involved in selling to a particular buyer, but simply provides a more efficient estimate of the risk.
Even with the most careful analysis, the seller always bears some risk that the buyer will default on the payment promise. When this happens, the seller must engage the services of a collection agency or an attorney. Depending on the amount in controversy, expensive litigation must be undertaken. Moreover, even after substantial expenditures toward collecting the debt, the seller may be forced to accept an amount far less than the original selling price. This ultimate risk, even after careful analysis, may never be known if the credit information about the buyer is stale. Although the '400 patent discloses that the system provides a “real-time determination of a risk classification of a buyer using an on-line repository of credit information”, there is no teaching of how frequently (or through what mechanism) credit information is updated. Moreover, there is no teaching in the '400 patent about collecting payment from a buyer who is in default.
SUMMARY OF THE INVENTION
It is therefore an object of the invention to provide methods for regulating and enforcing open account payments.
It is also an object of the invention to provide software for regulating and enforcing open account payments.
It is another object of the invention to provide methods and software for dynamic updating of buyer credit ratings.
It is also an object of the invention to provide methods and software for dynamic updating of seller performance ratings.
It is still another object of the invention to provide an index to buyers and sellers so that alternates sources can be found.
It is also an object of the invention to provide methods and software for automatically notifying a seller of a change in the financial condition of a buyer.
It is another object of the invention to provide methods and software for restructuring debts of a defaulting buyer.
In accord with these objects which will be discussed in detail below, the methods and software of the present invention include maintaining a database of buyers and sellers, updating the database with information from sellers about buyers who have defaulted on payment terms, processing data about buyers who have defaulted on payment terms, notifying the buyer(s) who have defaulted of a time to cure the default, determining when a buyer fails to cure a default in time, and notifying all sellers who sell to the buyer who failed to cure the default that the buyer failed to cure the default. According to an alternate embodiment of the invention, sellers are classified according to the types of goods/services which they sell and when a buyer fails to cure a default all sellers in the same class as the seller which was party to the default are notified. According to another alternate embodiment, all members in the system may obtain information about any other member in the system prior to doing business with the other member. As contemplated by the invention, individual members of the system may be at once both a buyer and a seller, e.g., a manufacturer who buys materials from a supplier and sells a product to a retailer. Further, although initially directed at enforcing payment, it will be appreciated that the methods and software according to the invention may be broadly applied to enforce performance, e.g. where a buyer has paid a seller and the seller has failed to deliver the goods or service properly.
According to other aspects of the invention, transactions are recorded with SIC codes or international customs codes so that alternate sources of goods and services may be found by users of the system. Disputes between parties are also classified so that members of the system may make dealing decisions based on the types of disputes in which a party has been involved. Users of the system may subscribe to be automatically notified of a change in the financial status of a party with whom they deal.
REFERENCES:
patent: 5732400 (1998-03-01), Mandler
patent: 5794210 (1998-08-01), Goldhaber et al.
patent: 5862325 (1999-01-01), Reed et al.
patent: 5974406 (1999-10-01), Bisdikian et al.
patent: 6052674 (2000-04-01), Zervides et al.
patent: 6233566 (2001-05-01), Levine et al.
patent: 2001/0005829 (2001-06-01), Raveis, Jr.
patent: 2001/0051884 (2001-12-01), Wallis et al.
patent: 2001/0056395 (2001-12-01), Khan
Gallagher Thomas A.
Gordon David P.
Jacobson David S.
Saunders Kevin
Weiss John G.
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