Whether you’re a long-time credit controller, a new business owner or a seasoned finance manager, a clear, consistent credit risk management process is key to doing more business, with the right customers, and getting paid faster.
Benefits of a proper credit risk management process
An effective, well-designed credit risk management process will save you time, deliver your customers a better experience, increase employee satisfaction, support compliance with government regulations, protect your assets and help secure your cash flow.
With an efficient credit risk management process you can do away with the ambulances at the bottom of the credit cliff. Any issues should be quickly identified as they crop up, giving you the opportunity to proactively manage your risk exposure.
How do you know if your credit risk management process is a good one?
There are three clear signs that you have built, and are running an effective credit risk management process.
1. Fast, easy onboarding
Having a good process will speed up new customer set-up. Doing business with you will be easy for customers using an online application form. And, with all the customer information you need to hand, you’ll complete due diligence faster. Customer credit decisions will be equally quick and easy, with your tools doing the hard work, making credit recommendations to you based on criteria you’ve previously set.
2. Real-time creditworthiness monitoring
A robust process will have automation baked in. Real-time alerts will let you know if a customer’s potential risks or probability of default has changed, or if an adverse event has been logged against them. Taking it one step further, the true value of this stage of the process is action. With real-time credit risk knowledge to hand, your credit terms will be adjusted as required to mitigate risk more effectively.
3. Minimal manual accounts receivables tasks
Say goodbye to sticky notes reminding you to call a customer on a particular date. A well designed, effective credit risk management process will reduce the amount of manual receivables tasks you are burdened with. Automation tools that form the foundation of your process will prioritise who you need to chase day to day. They’ll remove the juggle between systems with all financial information, customer contact information and communications history in one place.
Chasing customers should be faster and only those extremely tricky debtors should require human intervention. Bottom-line, you’ll be getting paid faster.
How’s your process looking?
If you’ve read this article and have a few lingering questions about your own credit risk management process, now is the time to act.
Not sure where to start? Map out your current process. Identify the areas that causes the most pain or are particularly hard for customers to navigate.
Some questions to ask yourself are:
- Do you use the PPS register?
- Are your customer application forms digital or paper?
- Have customers raised concerns or frustration with the steps they must complete to start trading with you?
- Are you automatically alerted to changes in customers’ financial situations?
- Do you have a consistent, automated accounts receivable process?
- Is chasing payment a series of time-consuming, manual tasks for you?
If you would like to learn more about how CreditorWatch can help you set up best practice credit risk management, visit www.creditorwatch.com.au
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