The Credit Application Process Tasks:
First, let’s examine the Credit Origination process and the tasks that are being automated. We will consider the case of a first-time buyer applying for $50,000 in credit. Here are the typical steps involved in the credit application process:
- Customer completes and submits the credit application
- The Credit Department reviews the credit application for completeness and accuracy
- The Credit Department requests additional information from the customer and third parties.
a. Credit references
b. Credit bureau report
c. Personal guarantee
d. Tax Exempt certificates
e. Financial statements, etc.
4. The Credit Department aggregates and evaluates the information received to determine the credit worthiness of the customer.
5. The Credit Department approves the credit requests if the evaluation result is good; otherwise, declines the request.
The above steps in the credit application process take time and become increasingly costly when the volume of transactions is high. Humans are prone to mistakes when completing repetitive tasks and have a high tendency of injecting subjectivities and personal preferences into the risk determination process and the interpretation of the credit worthiness of the customer.
The Process Costs
The processing scenario above presents us with two key costs variables: TIME and COST.
TIME refers to the time it takes to process steps 1-5:
- If it takes a longer time to process than your competitors, you may lose your customers to the competition.
A longer processing times slows down your order-to-cash cycle which is bad for your company working capital needs.
COST refers to:
Cost of credit personnel overhead and the supporting infrastructure
Cost of bad credit decisions, resulting in credit defaults.
In a number of worst cases observed in high-volume credit transactions processing environments, these costs could significantly eat into the sales margin, especially in low margin industries. Often, companies don’t track these costs because if they do, the CFO will get really concerned.
The Automation Solution
Now back to where we started from. There is indeed a solution and that solution lies with process and task automation. The right solution executes steps 1-5 above on the condition that the credit application is 100% digital.
- The right automation should be able to implement time-tested rules derived from
the collective experience of credit personnel and the corporate operating credit
policies.
- The right automation should also provide statistics of the credit applications
processed, actions performed, and decisions reached.
- The right automation should be flexible and intelligent enough to allow for
segmentation of process behavior based on the common characteristics of the
customer segment being evaluated.
Tip: Visit bectran.com to learn more about the right credit automation process for your company.
About Bectran [www.bectran.com]
Bectran, the industry leading SaaS platform, has grown rapidly over the years to become the companion toolkit for the credit department just as CRM is for the sales department. From simple to complex organizations and SMEs to Fortune 500 companies, Bectran has helped companies cut down the time to process and approve credit by over 90% whilst significantly lowering the risk of credit defaults and the cost of collections.
A growing number of companies are depending on Bectran to manage their Accounts Receivable and Collections. With significant process and task automation, companies are able to cut down the cost of collections by as much as 60-90% while accelerating the cash receipts cycle with complete and accurate cash applications.
Bectran’s clients enjoy the ease, speed, and cost-effectiveness of adopting the Bectran platform. New clients are on-boarded in a matter of days or weeks. Credit professionals in various industries have described the Bectran platform as the future of the credit department.
Dominic Biegel is a Business Development Manager at Bectran. He is focused on helping customers implement the best solution strategy on the Bectran platform.
The views expressed on this blog are those of the author and do not necessarily reflect the views of Bectran. This blog may contain links to content on third-party sites. By providing such links, Bectran does not adopt, guarantee, approve or endorse the information, views or products available on such sites.
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