In the B2B space, most businesses operate on credit, but this system has its drawbacks. Granting credit without a thorough review of customers could be risky, especially for mid-sized companies.
Like a car needs fuel to run, a mid-sized business needs a healthy cash flow to survive. A single delinquent account can result in a significant disruption of the cash flow. Therefore, businesses must ensure that their customers pay according to the agreed terms and conditions.
Read on to get a comprehensive overview of the credit application and approval process in mid-sized businesses. Furthermore, you can try out some ready-made credit application templates for faster onboarding of customers.
Businesses use credit applications to collect the required information from the customer to review their creditworthiness. It protects businesses from delinquent accounts, obligation defaults, and nonpayments.
The credit application form determines whether the customer can be sold goods on credit and the extent to which the credit can be extended in terms of the amount, credit period, and more. Therefore, businesses need to ensure that customers provide all the required information, and once captured, the details need to be verified.
Below mentioned are the essential fields a credit application must include:
Here is a list of templates that will come in handy when you send out credit applications to customers.
Once the details are filled in, the application form must be cross-checked. Afterward, the credit department follows several steps to verify and approve the application. The steps are as follows:
One must follow a structured process when granting credit to customers. Here are some quick and easy steps to guide you to make the right judgment:
The role of credit analysts doesn’t stop once the customer gets onboard. Periodic reviews are necessary to monitor the credit health of the company. Just like the new customers, long-term customers may also struggle with payments; therefore, customer credit limits need to be reviewed at regular intervals.
Like Hawking’s ‘Theory of Everything,’ mid-sized businesses need to have one integrated credit application to counter the misfortune of a delinquent account, obligation default, or payment failures. A ready-to-use Excel-based Credit Application Template might come in handy for effectively collecting customers’ data and creditworthiness checks.
Sending out credit applications manually and verifying them for credit approval requires time and effort. The possibility of human error also needs to be considered. As a result, businesses worldwide leverage automation to ease the process. Solutions such as RadiusOne Credit Risk Management Application help mid-sized businesses with their real-time credit management to lower bad debt and improve cash inflows.
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