Sure, you understand that it’s important to protect your business from risk. You even get that every business is different and you need to take a unique, customized approach. But one of the easiest ways to cover your bases when it comes to risk management is by working smarter, not harder.
What do I mean by that? Well, take a look at a tool you may already be using in your business: automated credit decisioning (Not using automated credit decisioning yet? You’re missing out).
You may be using it to manage risk at one point of the customer lifecycle, but it could be doing even more for you. Continuous risk management is always the goal, right? So, let’s see how automated credit decisioning can help you make it happen.
1. Build risk mitigation into your existing credit processes
This is potentially the most common use of automated credit decisioning. In a nutshell, you use an automated decisioning tool to quickly evaluate customer creditworthiness in the early stages of the customer relationship. A good automated credit decisioning tool will be easily customizable and allow you to make changes in an instant. That way, if your business’ plans or goals change, your decision-making process can easily change with it. You could be checking new customers against your credit process after you’ve already spent time and resources nurturing them as a lead. But you run the risk of spending all that time on a deal that the finance team ultimately won’t approve, because they don’t align with your credit policy. Building risk mitigation into your process from the beginning not only protects your company, it also helps to streamline the customer onboarding process.
But the kind of in-depth analysis you need to do to protect your business takes time. In fact, our research has shown that 75% of finance managers take up to 8 hours to reach a single credit decision on a customer. And when you’re working with dozens – or even hundreds – of credit applications each month, that time quickly adds up. With automated credit decisioning, you can set up your decision tree to look for exactly that kind of information. Only accept customers whose full financial health points to paying on time and protecting your business from risk.
2. Proactively avoid financial surprises from longstanding customers
It’s great to vet customers before you start working with them. But circumstances can change in an instant – it's not enough to say “case closed” once you’ve onboarded a new customer. They may have aligned with your credit policy and company strategy when you first started working with them, but that doesn’t mean they can’t become a risk to your business.
Whether your company policy has changed, you’re expanding into new territories, you’ve set new goals or global events have meant customers could be riskier, it’s important to keep checking your customers. But how are you supposed to focus on business growth with new customers and continue to check on your existing ones?
You guessed it: automated credit decisioning can save the day here, too. Running your existing portfolio of customers through an automated credit decisioning tool can give you an idea of who still works – and who doesn’t. Simply set up a decision tree based on your business’ current needs and run a bulk decision on your portfolio. You may find that you’re working with customers who are too risky for your business, or that you’re missing out on opportunities for upselling and other growth with existing customers.
Automated credit decisioning tools make this exercise something you can do much more often. Think about it: how long would it take for a credit manager to evaluate your entire portfolio from scratch? The answer is probably anywhere between weeks and months. And let’s be realistic: even if you did devote all that time to evaluation, you definitely wouldn’t be able to repeat that more than once a year. With automated credit decisioning, you can check on your entire portfolio monthly in a matter of seconds.
3. Save time to devote resources to complicated cases
Now, don’t get me wrong: I’m not saying that we’re officially in the age of robots taking over (at least, not yet). Automation can be a hugely valuable tool for your business to manage risk and encourage growth. But automation on its own isn’t enough: you’ll always come across unique cases that need a human touch to work through.
The thing is, though, automation can also help with that. Think about what we said earlier about how long it takes to manually process credit decisions. Depending on the size of your team, they could be spending 40 hours a week – the entire work week – slogging through manual credit decisions. Now, think about what their workload could look like if those 40 hours were cleared from their plates. Suddenly, they’d be able to think about big picture things like credit strategy and growth opportunities. They’d have more time to focus on difficult credit decisions or to track potential red flags in customers’ and suppliers’ financial health and payment histories.
Have you ever turned off your car radio so you could focus on parking? The two things shouldn’t be related – you don’t use your ears to park, after all. But it’s difficult to focus on an important task in front of you when there’s too much noise everywhere else. Automated credit decisioning can mute all that noise. And from there, your team can become more focused, powerful and agile than ever before.
Faster onboarding. Smarter decisions. Better risk management.
Try Creditsafe's automated credit decisioning tool today.
About the Author
Mark Laube, Product Director, Creditsafe
Mark Laube has over 8 years of leadership experience and deep expertise in business credit data, financial data integration, and evolving market needs. As Product Director, North America, Mark drives the strategic direction of Creditsafe’s product suite with a focus on innovation and trusted solutions. His role demands a high level of authority in navigating the business credit and risk landscape, and his insights are instrumental in shaping product developments that businesses can trust.
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