Digital Transformation in Business Credit

Digital transformation is rapidly upending existing business practices. Automation, robotics, artificial intelligence, AR/VR, cloud computing, big data, internet of things, etc. promise to upend existing business practices, create new business models, and transform the business landscape. Historically, new technologies created competitive advantage for early adopters. New digital technologies promise the same results for those organizations with the vision and leadership to fit emerging technologies to long-term strategic objectives.

In today’s business organization, CRMs are now a must-have for sales, IoT is driving efficiency and visibility in the supply chain, and IaaS, PaaS, and SaaS offerings increasingly replace traditional IT solutions at a rapid pace.

The finance organization, however, has been slower to adopt new technologies. According to research from Wax Digital, 1/3 of accounts receivable tasks are still fully manual. Arguably, a higher fraction of manual tasks persists in business to business credit. Fax machines and filing cabinets are still a common sight. Manual data entry, aggregation, and analysis persist. The digital credit department promises strategic gains in four broad categories: operational efficiency, customer experience, enhanced cash flows, and visibility.

Past technological revolutions saw giant leaps in productivity and operational efficiency. Digital transformation will be no different. In a PwC survey, 88% of CEOs said the highest value of digital transformation lies in operational efficiency gains. Automation will drive greater operational efficiencies in the credit department by eliminating manual tasks that represent bottlenecks at each step of the credit process. Automating these tasks results in quicker credit approval times, decreased error rates, shorter cash conversion cycle, and allows employees to focus on more strategic tasks.

The digital credit department also delivers a superior customer experience. A customer portal with an intuitive user interface enables customers to be more active in the credit management process by enabling communication, providing instant status updates, and allowing the customer to be proactive in eliminating credit bottlenecks. The overall result is a seamless customer experience that eliminates frustrations inherent in a process built on manual tasks. These types of experiences are starting to be de facto expectations by customers as digital technologies become pervasive throughout daily life.

The dated processes of traditional credit management result in cash flow bottlenecks. The digital credit department actually enhances cashflows. Quicker and instantaneous credit decisions expedite the buying process, increasing revenue and customer retention. Standardized, front-end risk analysis creates a higher quality credit portfolio, resulting in lower DSO and lower collections costs.  The digital credit department achieves strategic credit objectives at lower costs than the existing process by eliminating overhead costs associated with paper management, facilitating FTE repurposing, and reducing the need for paper-related technologies like fax machines and printers.

Lastly, the digital credit department provides unprecedented transparency into the credit management process. Workflows provide end-to-end management, monitoring, and reporting of every credit transaction. Real-time analytics, easy and quick data integration, and meaningful reporting provide actionable intelligence for decision makers, allowing them to remove bottlenecks and increase productivity. Boards are demanding more information from their CFOs than ever before, and many are falling behind in this regard. The transparency enabled by the digital credit department provides senior managers necessary data in managing credit risk.

These categorical changes will drive meaningful business results. The digital credit department will remove bottlenecks from the financial supply chain. Operational efficiency and productivity will dramatically increase. Working capital costs will decrease. Compliance costs and risks will decrease. Information security will be greatly enhanced. At the end of the day, the result is bottom line and top line growth.

Credit management is often overlooked in digital transformation, even as other aspects of corporate finance have adopted new technologies. This can no longer be the case. No organization should let digital transformation fail in their credit operation. Digital is the way of the future for credit. Adopting now creates competitive advantage. Waiting to adopt leaves the organization at risk of becoming obsolete.