To sustain the financial health of your business, having a thorough approach to credit risk management is more important than ever. Maybe the simple thought of adding new customers makes you shudder because you know just how many potential bottlenecks you could face. While this is completely natural considering there are many factors that can compound the risk assessment, it is important to know that you don’t have to feel this way when you approach credit risk management. By following credit risk management best practices and implementing risk mitigation strategies upfront, you can alleviate some of this uncertainty and set your business up for success.
That’s why it’s important to adopt proven credit risk management strategies. Currently, how do you deal with delinquent customers in the B2B space? You need robust credit risk management best practices to minimize credit defaults and improve the efficiency of your order-to-cash cycle. Here you will learn more about these practices and how to apply them to make this a seamless experience for you and your team.
4 Credit Risk Management Strategies
The right credit management strategies are the ones that paint a comprehensive picture of a borrower’s creditworthiness to help you understand the risk level of extending credit and make onboarding your customer a smooth process. Sound credit risk management requires a plan that will help you evaluate your customers, and the first step in implementing best practices into your workflow is obtaining a solid understanding of your customer.
When considering a customer in the initial application process, how do you go about making quality credit decisions? Do you have a set of procedures to rigidly follow or is your strategy more of a whirlwind of activity? Strong credit management best practices will reduce the risk of fraud and other threats to your business. Below are several key elements of a strong credit management process.
While credit risk management best practices vary from business to business, here are four of the most effective strategies we have found:
1. Provide an online application form
Online credit applications guarantee complete and accurate information with real-time automated data gathering. You can easily configure your application to ensure all sections are mandatory to avoid missing any information from a customer. This is a huge time saver for a credit department, as there is no need to follow up with a customer to request additional information. You get to skip manual data entry and eliminate errors and the time spent completing this task. Overall, an online credit application makes it easier to gather and store data, saves you time and streamlines the process for you.
2. Establish a framework for risk analysis and decision making
- Aggregating information from various sources will help improve your credit risk assessment accuracy and provide you with a comprehensive overview of a customer risk profile. Before onboarding a new customer, review their financial history from agencies, institutions and sources such as:
• Credit bureaus: DNB, Transunion, Experian, etc.
• Organizations: NACM, CRF, etc.
• Banks, personal guarantees and trade references
Customer risk assessment models built into your workflow can also improve your decision-making capabilities. A targeted credit risk evaluation model can produce a more defined measure of risk.
3. Real-time credit risk monitoring and reporting
An ongoing evaluation of existing customers is crucial in a dynamic business environment to ensure the financial health of your business and minimize your credit exposure. Monitoring credit risk in real-time keeps you informed of potential losses to your business before they become a problem. With the right credit monitoring tool, credit risk can instantaneously be identified and mitigated.
In fact, certain solutions will send an alert to credit teams directly if a particular customer shows late payment trends and exhibits other indicators of delinquency. In this case, using a real-time monitoring tool will help you mitigate risk before it develops into a more substantial issue. Most credit management solutions integrate with agencies to provide real-time alerts to your team, keeping you informed of all potential business losses.
4. Maximize automation for streamlined credit risk management
Any adoption of an automation solution is an efficiency gain for you and your team, reducing both manual intervention and workload. You can ensure no major credit issue goes unnoticed and receive real-time alerts to mitigate issues that put your revenue at risk.
While any automation significantly improves workflows, an advanced automation solution frees up much more of your time to focus on other strategic organizational goals. For example, advanced credit review automation like that provided by Bectran utilizes an automated decisioning solution to instantaneously approve credit reviews based on a combination of internal and external criteria — empowering users to maximize the features of automation.
How Bectran Can Help
Businesses that leverage B2B technology to manage credit exposure are likely to have fewer delinquent accounts and better customer relationships. Overall, a credit management solution can amplify your scalability, make your job easier and allow you to focus your efforts on other goals that can enhance your financial health.
Bectran offers affordable credit management and accounts receivable automation solutions for all sizes of organizations. Our credit management suite offers robust credit evaluation services and real-time risk monitoring while supporting an efficient customer onboarding process. From pulling bureau reports from multitudes of credit agencies to utilizing fraud prevention tools such as Secretary of State services, Bectran offers comprehensive solutions that are customizable to fit your needs. We have helped businesses across multiple industries make the transition to powerful technology solutions that save you time and money. For more information and to learn more about how credit management best practices can be implemented into your workflow, request a demo today.
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.
Bectran is a registered trademark of Bectran, Inc.