Recent world events have demonstrated just how quickly businesses can be thrown into significant disruption and uncertainty. Crisis and economic uncertainty can be a game-changer for credit management practices; whilst conventional sources of data remain vital, credit managers can quickly need to source and analyse a whole new range of information to accurately determine customer credit risk. Any existing financial or market data that had previously been relied may no longer help in assessing the creditworthiness of new, or existing, customers.

Adapting to reduce risk

Credit teams have to adapt - and fast - to source real-time credible data to employ in decision making and risk assessments. It is evident there are economic challenges ahead and many teams will look to further improve their practices.

At an Esker and CICM panel event, Sarah Cook, Director at FRP Advisory Services shared her insight:

“Whilst winding up petitions are still relatively low; the majority of insolvencies are instigated by the Directors of companies in financial distress on a consensual basis and these are already starting to rise. The rise in cost of living and inflation is also expected to hit companies already facing financial distress and push them ‘over the edge’.”

In the face of an ongoing economic crisis, how can credit teams equip themselves to manage inflated, and often opaque risks? Martyn Brooke, Credit Management Specialist at Esker believes that the answer lies in digging deeper to acquire insights on sectors and financial data to further inform the credit assessment processes. 

Consider these factors:

Financial data. The latest management accounts view will reveal critical detail of the cash position, liabilities, and debt-servicing capacity.
Transaction data. Internal data should be increasingly drawn upon and monitored including payment trends, requests for increased credit, or changes in supply frequencies.
Industry data. To augment financial data, source data on the pandemic impacts, insolvency rates, unemployment statistics, and other key industry indicators.
Subsector data. Portfolio monitoring should include an assessment of your customers’ growth potential. Consider how your customer’s key markets are affected.
Credit Application Form. A complete credit application form is vital for all new customers, even if it’s a cash sale. Simplified and customisable templates will help speed up the process of approval.

Ongoing monitoring of existing customers is vital, Brooke says, to measure and anticipate risks but also crucially to realise opportunities:

“It’s critical for credit teams to employ a regular credit review process, to react as quickly as possible, drive amendments to your credit policy and better target your actions. In searching for red flags make sure you don’t overlook positive indicators – regular monitoring can often reveal opportunities to offer more attractive credit terms to encourage more business from growing customers.”
 

The disparate data challenge

One of the major challenges of a manual credit application process is the sheer volume of paper that teams are required to obtain, track and maintain at each stage of the process. Enhanced portfolio management across the customer base further increases volume and complexity so requires improvement of the quality and coverage of your data. And rigorous documentation and auditability is essential to avoid potential legal pitfalls.

Digital transformation of the credit function ensures that all relevant customer data is always instantly accessible and easily manageable. Third-party data integration retrieves key scoring data from your preferred credit bureaus.

When coupled with an automated receivables solution, an AR automation platform offers a 360-degree view of critical customer information, empowering credit teams with actionable data to make the best credit decisions possible.

Crucially, real-time internal customer account data (such as, open invoices, total outstanding, pending orders, payments, receivables history and aging graphs) can be viewed and assessed as part of the customer credit review process.

With an ever-growing scope of data to keep on top of, teams can be assured that no major credit event will go unnoticed and put revenue at risk, as today’s automation solutions are packaged with fully customisable dashboards, counters, and alerts to keep credit managers fully aware of the credit activity and potential risks with alerts including credit limit utilisation, credit review reminders and blocked orders.
 

Technological innovation to achieve positive-sum growth

Customer onboarding is often the first post-sales customer interaction, so it is essential to offer a streamlined process that balances customer expectations with the need to prove creditworthiness in a compliant manner. As customer expectations grow, it is vital to ensure account specifics such as shipping/billing information and contact details are accurate, as errors can have catastrophic consequences and severely impact the customer relationship.

A digital credit application process utilises fully customisable templates and sends them via email or embedded link (included in sales quotes or communications) to get the most complete and accurate information from the customer ahead of the first order. This speeds up customer creation in the ERP and ensures data accuracy right from the outset.

Credit score and credit limits can be calculated automatically, while workflows are assigned to all necessary stakeholders to review and approve the data to which they are responsible for, ensuring a fully traceable and cohesive approval process.
As the current pressures on supply chains, interest rates and inflation show no signs of abating, the future is about building a complete digital infrastructure that can support efficient, customisable digital journeys for onboarding that can gather and maintain information as smoothly as possible. Efficient and flexible systems that are accessible via multiple channels are important to allow credit teams to adapt quickly to fast-changing situations and place the customer and business needs at the heart of the process. The ability to create and sustain a single, comprehensive customer view will be vital for any organisation to ensure robust, agile, and thorough customer onboarding and portfolio management processes.

Make smarter credit decisions, faster, with Esker Credit Management

Esker Credit Management is an AI-driven solution which enables businesses to secure revenue through an optimised credit approval and risk monitoring process. The solution combines all relevant internal and external credit information to make data-driven decisions and mitigate risks connected to credit liabilities. With alerts and low-risk decisions automated, credit analysts can focus on the riskiest customers.
 

- Optimising & securing your team’s customer onboarding process
- Automating all “business as usual” credit decisions
- Empowering staff with actionable data to make faster, smarter decisions

Get in touch if you’d like a demo!