Credit risk management: dynamic data and the right credit management strategy are key

Red teams security

Predicting the future credit landscape is always difficult for companies, even in the best of times. However, it is clear that the quality of available data and the way it is delivered and used will determine this future picture. Live and up-to-date data are therefore crucial for financial professionals who want to make the right choices and minimise risks.

Traditional searches do not provide sufficient insight to properly assess potential transactions. Therefore, leveraging dynamic data, such as fraud analysis, trade payment data, CCJ or legal information, is necessary to reduce risks. These live data can be easily integrated into accounting or CRM platforms and help identify risk areas in terms of bad debtors.

The risk of fraud

Fraud can cause major problems for businesses. Financial fraud is increasing every year and recognising fake companies is a challenge. Fortunately, credit reference agencies can help identify suspicious organisations. The use of automated intelligence and algorithms can also help in analysing data and predicting reliable credit decisions. Relying on professionally obtained data is thus crucial for minimising financial risks. Dynamic data provides real-time insight and can enrich historical data. Credit reference agencies also provide near real-time payment market experiences that prove to be a predictive source of information.

Prevention is better than cure

So how can you best mitigate any future damage, even in turbulent times? Every business would obviously like to receive as many payments as possible. However, especially in turbulent times, it can be difficult to ensure that customers pay on time. It is therefore important to take risk mitigation measures in addition to correctly interpreting your dynamic data. This is to significantly increase the likelihood of timely payments.

The order-to-cash process starts with the purchase of a product or service and ends with the payment and processing of the invoice. It is important to be efficient and effective at every stage of this process. This way, you can reduce the risk of non-payment and ensure future-proof financial success and stronger customer relationships. This starts with credit management.

Invest in the right tools

Investing in tools and associated data to minimise financial risks can provide long-term savings. A credit controller or credit manager can therefore make a business case for their organisation to invest in these tools. Communicating the return on your investment is key in this regard.

In short, live and up-to-date data are crucial for credit risk management and can save businesses. Using dynamic data, automated intelligence and algorithms can help minimise financial risks and make reliable credit decisions. Investing in credit management software can provide long-term savings.

Credit insurance brings inner peace

Credit insurance can help protect your finances and peace of mind from potential non-payment. After all, despite careful credit checks, something can always go wrong. Credit insurance can cover at least part of the outstanding amount, so you can avoid financial problems and mitigate risks. Just keep in mind that there are rules, such as credit limits per customer. It can be difficult to keep track of each customer’s status, especially if you have hundreds of customers. As a result, higher-risk customers may go undetected before exceeding their limit.

A thought-out dunning strategy

A clear, considered and effective dunning strategy is essential when it comes to minimising risk in credit management. Careful debtor management and a well-designed dunning process are central to the overall process. When you understand customer payment patterns and incorporate information on risk factors, you reduce the likelihood of payment delays and financial shortfalls. Split your strategy into three phases: structured dunning, dispute management and internal and external cooperation. By using an established dunning process, it is possible to incorporate information on customers’ payment habits into the credit management process, for example.

In this ever-evolving technological world, there are new tools and solutions for every process that help reduce risk. This also applies to the credit management process. However, there are also plenty of other ways to reduce risks and improve credit management.

Above, we have provided tips that can be applied organisation-wide, but there are also a number of other tips that you, as a credit manager, can consider to mitigate risks.

  1. Know your customer – One of the most important ways to reduce credit risks is by knowing your customer well. If you have more information about your customer, you can better assess the risks before entering into a business relationship. Therefore, feel free to request information from the customer, but also do your own research. You can look up information about the company online and read reports from credit companies. In addition, you can have the creditworthiness examined by a professional agency.
  2. Assess information carefully – Gathering information about your customer is only the first step. It is also important to carefully assess the information and analyse trends. Don’t just look at the surface, but also assess the financial health of the company. Pay attention to rising trends, but especially look at a company’s loans and working capital ratio.
  3. Consider customer scoring – A system to assess the creditworthiness of customers can help reduce credit risks. Using a scoring system, you can make better decisions. It also contributes to productivity and reducing credit risk.
  4. Pay attention to sector activities – Once you know more about the sectors in which your clients operate, you can better assess credit risks. Find out who the market leaders are, what the growth prospects are and what the challenges are for the future. In addition, try to get a picture of the supply chain. If someone does not pay your customer on time, this will ensure that your customer does not pay you on time either.

Want to know more about risk management? Feel free to contact one of our sales advisers. They will be happy to discuss a tailor-made solution with you.


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