Key Takeaways
- An efficient credit management system should streamline credit data aggregation, credit scoring, and approvals, and provide real-time visibility into portfolio risk globally.
- To choose the right credit management system, identify existing problems and consider maintenance, cost, security, and timeline.
- An AI-based credit management software simplifies credit management, mitigates risk, and improves cash flows with real-time credit visibility and streamlined workflows.
Why Is It Important to Choose the Right Credit Management System?
In the US, about 97% of B2B transactions are made on credit. This is because selling goods on credit not only helps you grow as a business but also sets up a solid foundation for your customer relations. To boost revenue and optimize working capital, companies invest a lot of time, resources, and money to establish an effective Credit Management System.
With an inefficient credit management system, business organizations lack the ability and expertise to predict upcoming risks related to customers going delinquent. This leads to
- Delayed collections
- Increased bad debt
- Adverse impact on customer relationships
A full-proof credit management process should be able to forecast upcoming business risks, and credit teams are expected to play the first line of defense for any organization. The below section provides further insights into the traditional credit management system still followed by most businesses around the globe and the complexities that come along with it.
How is Credit Management Traditionally Executed in the B2B World?
In the B2B world, credit management is traditionally executed through a series of manual interventions, which can be time-consuming and often lead to errors. Here are the major challenges faced by credit teams:
1. Slow, Paper-Based Customer Onboarding:
Credit teams onboard new customers using credit applications, which are often paper-based. This method can result in missing or incomplete business information and slow bank and trade reference verifications. This leads to delays in customer onboarding and impacts the overall customer experience.
2. Manual Credit Data Aggregation, Credit Scoring, and Approvals:
Credit teams manually download credit reports from various portals and regional credit bureaus. After downloading the reports, credit analysts review the credit ratings and financials manually and calculate the credit score. This process can be time-consuming and lead to errors in credit approvals.
3. Lack of Real-Time Visibility into Portfolio Risk Globally:
With periodic reviews, credit teams struggle to identify at-risk customers, especially in unpredictable economic conditions. With thousands of customer portfolios, it’s difficult to regularly review and track changes in their credit profile.
4. Manual Review and Release of Blocked Orders:
When a customer exceeds their credit limit, upcoming orders are blocked. Credit teams either release blocked orders based on sales’ insistence without payment commitment or wait for collectors to collect partial payments, leading to shipment holds and poor customer experiences.
To overcome these challenges, modern B2B credit management teams are becoming more data-savvy and using advanced tools like Artificial Intelligence (AI) and Robotic Process Automation (RPA) to reduce bad debt and improve cash flows. By leveraging automation, credit teams can streamline credit data aggregation, credit scoring, and approvals, and gain real-time visibility into portfolio risk globally. This leads to a more efficient credit management system and a better customer experience.
Factors to Consider While Choosing the Right Credit Management System
An efficient credit management system should bring transparency and proactivity to credit risk management. It should be capable enough to streamline all business processes linked to credit management and help business organizations deal with their everyday challenges in the following ways:
- Faster customer onboarding with reduced overhead complexities.
- Real-time access to critical credit data for accurate credit decision-making.
- Better transparency and accountability across all process hierarchies.
- Limited financial impact from changes in customers’ financial situations.
- Centralization of data across all business units and process levels.
- Enterprise-wide implementation of standard credit policies.
- Increased team productivity and efficiency by reduction of errors and manual work.
- Improved customer experience along with strong support to top-line business growth.
Furthermore, to choose the right credit management system for your business, you need to identify the problems that your existing credit management system is not solving. It also varies as per your business requirements because every business has unique problems. The more specific the problem identification would be, the better decisions could be made while choosing the right credit management system.
Choosing Between Different Types of Credit Management Systems: Cloud Vs. On-premise
There are four major parameters that can help you choose within on-premise and AI-based cloud solutions for credit management:
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Parameter for Evaluation |
On-Premise Solutions |
AI-Based Cloud Solutions |
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Maintenance |
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Cost |
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Risk & Security |
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Timeline |
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Key Features to Look for in a Credit Management System
When selecting a credit management system, there are several key features to look for that can help improve your credit risk management process. Here are some of the most important features to consider:
1. Real-time Credit Risk Monitoring
2. Configurable Scoring Models & Approval Workflows
3. Highly Configurable Online Credit Application
4. Automatically Extract Credit Data
5. AI-Based Blocked Order Management
6. Seamless Integration with Collections, Payments & Deductions
By choosing a credit management system that provides these features, you can streamline your credit risk management process and make data-driven credit decisions.
Simplify Your Credit Management with HighRadius
HighRadius offers an AI-based credit risk management software that can help simplify your credit management process and mitigate risk. With HighRadius, you can gain real-time credit visibility and manage global portfolios through comprehensive workflows. The software provides a range of features, including:
- Real-time Credit Risk Monitoring: Get real-time alerts for any changes in your customers’ credit profile and make data-driven credit decisions from unlimited credit reports. HighRadius can integrate with your ERP and start monitoring in just 30 days.
- Configurable Scoring Models & Approval Workflows: Customize credit scoring based on geography, customer segments, business units, etc. and automate credit scoring for low-risk customers. HighRadius can fast-track credit approvals through complex corporate hierarchies.
- Highly Configurable Online Credit Application: Onboard customers across the globe with multi-language, customized credit applications embedded on your website. HighRadius can automatically capture financials, personal guarantees and check bank references.
- Automatically Extract Credit Data: HighRadius can auto-capture credit ratings, financials, and credit insurance information from 40+ global and local agencies. Configure the auto-extracted data in your preferred currency.
- AI-Based Blocked Order Management: HighRadius can auto-predict blocked orders based on the customers’ credit limit utilization and payment history. Leverage AI-based release or partial payment recommendations for faster credit decisions.
- Seamless Integration with Collections, Payments & Deductions: Share credit scores and risk analysis with collectors, review collectible amounts to calculate adjusted credit exposure, and dynamically update credit exposure leverage payment and dispute information.
By using HighRadius, you can simplify your credit management process and make data-driven credit decisions. The software is designed to streamline credit data aggregation, credit scoring, and approvals, and provide real-time visibility into portfolio risk globally. With HighRadius, you can reduce bad debt and improve cash flows, leading to a more efficient credit management system and better customer experience.
