Credit Management

While onboarding hundreds of customers, the number of reports you have to pull have significant dollar value. However, since you do not have any history to rely on for new customers, you need to bear this expense to ensure that you have enough data to make an informed credit decision. The following strategies can help optimize this expense and make sure that you have credit reports on possible prospects who you want to do business with.

Waterfall Methodology

The Waterfall methodology enables you to define an order of priority for the agencies, rather than pulling reports from all the agencies at once. If you don’t get the required information in one agency, pull reports from the other. It is beneficial to get the cost of operations down by not paying for redundant reports with information that might not be useful.

Age Rule

Configurations can be set to ensure that a credit report isn’t pulled from the agencies if a previous report pull happened within last 6 months. It enables to optimize the credit report spent.

An integral part of the B2B world is the credit risk. You would want to pay close attention to your High Risk customers and review them more frequently than lower risk customers.

A Risk Class based frequency can be set for periodic reviews.

Every x number of months, the customer is reviewed based on the defined frequency to minimize the credit risk. You can revisit them depending on their risk class.

The following is an example of how you can set up a periodic review.

The approval process helps the user with their increase in credit limit. The credit limit can be increased automatically without the help of the credit analysts, but in some cases it might need committee to approve the credit limit increase by reviewing the inputs from various stakeholders.

Auto Approval

Auto approval helps to reduce the workload on the credit analysts and improve the analysts’ efficiency. The new customers with low risk class and credit limit below a certain value are automatically approved.

For example, if the credit limit is <10000$ for existing customers, it will be auto approved.

Committee Approval

In some cases, you might want to have inputs from multiple stakeholders on a particular review rather than an individual’s. In such scenarios, committee approval can come in handy. For critical applications (such as in cases where credit limit >10000$), the approval process goes to a committee of approvers. If majority of the committee has approved (n-1 users have approved), the case will be approved by Committee Approvals. It helps to have due diligence to reduce risk by the supervision of more analysts.

If multiple entities from the same organization is doing business with you, rather than handling them individually, you can engage with the parent level organization. In such case of parent-child hierarchies, the analysts can conduct group credit reviews on the parent level organization and distribute the credit limit to the child organizations accordingly. By maintaining organization hierarchies, you can clearly view the credit limit assigned to the organization. It is easier to manage and understand the customer structure and creates better visibility on the process.

After an application is submitted by the customer onboarded through OCA, an automated email can be sent to the customer and apprise them of the decision (approval/rejection) through auto correspondence. You can also configure emails to owner/processor to get email notification. This helps to increase the transparency of the process for the new customers for better customer experience.

A new AI feature has been created with the capability to predict Blocked orders. The Highradius Credit Management can now predict orders and payments individually, based on the current exposure, the volume of orders, and the payment history. They then, superimpose the information with the assigned credit limit to get a visibility of orders that are likely to get blocked in future and act on them effectively.

It helps to -

• Avoid disruptions to the customers’ business, and

• Help you be proactive about block order management using a Preventive mode.

With the rapidly changing economic scenario, being aware of how the financial health of your customers is changing is of utmost importance. Monitoring services from Credit Agencies can come handy in helping you be on top of this game. Agency monitoring services give instant notification to the analysts of workflow items. It is created to review any customer who has been filed for bankruptcy, been downgraded, or has had a decision made against them.

You can choose to put a Credit Block on the customer, stop their deliveries, and so on, depending on your discretion. Real time alerts and notifications helps you to cancel their orders and deliveries, and reassign the credit limit to make sure that they can’t place any more orders. It helps to reduce your bad debt risk.

Capturing Bank and Trade reference information help you to make informed decisions about credit worthiness of the prospective buyer by getting information from banks/companies they have done business in the past. This helps in getting information on past payments or their buying behavior.

• For new businesses, the financial or credit agencies might not have enough information on the customer especially in case of smaller private customers. So, as a supplier, you’ve to talk with the trade partner organisations the customer has done business with to assign the appropriate credit limit.

• If the customer is in business for a long time, you will have access to information through financial or credit agencies to provide data points and the credit worthiness of the customer. The bank and trade references act as a supplement for better credit decisioning.

By setting up insurance policies in Credit Management, the credit which has been extended while reviewing prospects/customers can be covered and help reduce the credit risk. Credit Management integrates with insurance providers who, for a premium can back the amount that you extend. Once purchased, the policies need to be setup in CRD manually. Thereafter while assigning credit limit to any prospect/existing customer, coverage from this policy can be used to minimizes the credit risk.

It is especially useful when dealing with clients from high risk industries.

On special occasions like festivals and holidays, the sales will be high. The customers can request for a temporary increase in credit limit for that particular period, otherwise their order gets blocked. While setting the seasonal limit, you can also define how long it is applicable for. Once the set time period expires, the system automatically resets the value back to the old Credit Limit.

The manager(s) can approve or reject the customer’s credit limit request through their email accounts itself. The manager doesn’t necessarily have to log into the Highradius portal to approve/reject credit limits. After the analyst approves an approval workflow, the manager will receive an email through which they can review the customer’s performance by analyzing the customer credit information. The response will be automatically updated in the Highradius portal and simplifies the approval workflow process.