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Customer Onboarding and Credit Approval Process


How Fortune 1000 companies and SMEs automate credit and accounts receivable operations to improve productivity and reduce DSO and past-due A/R.

Contents

Chapter 01

Executive Summary

Chapter 02

Customer Onboarding and Credit Approval Process

Chapter 03

Dynamic Scoring for Credit Review

Chapter 04

Improving the Invoicing and Payment Process

Chapter 05

Deciding Who to Contact on Any Given Day

Chapter 06

Collections Correspondence Strategies

Chapter 07

Doubling Down on Collections by Eliminating Waste from the Cash-Application Process

Chapter 08

Providing Research Ready Deductions

Chapter 09

Shifting Focus to Invalid Deductions

Chapter 10

Leveraging a Connected Platform for All of Credit-to-Cash

Chapter 11

Collaboration with Buyer A/P teams

Chapter 12

Accounts Receivable on Autopilot ? Autonomous Receivables

Chapter 13

Summary

Chapter 14

About HighRadius
Chapter 02

Customer Onboarding and Credit Approval Process


Customer onboarding is the first and one of the most important steps as wrongly estimated/arbitrary credit limits lead to bad-debt write-offs and high DSO. Most organizations ignore this step and take the word of sales representatives or customers to decide on credit limits.

2.1. The Credit Application Process

According to a survey by NACM 33% organizations are pressed for time to perform due diligence on prospective customers. This is because companies typically assign credit limits based on credit agency data, financials, credit insurance, and bank guarantees. All of the manual processes, including paper-based credit applications, gathering data from third-party agencies such as D&B and Experian, and credit reviews, make it increasingly difficult for credit analysts to find time and onboard new customers. Credit Review and Customer Onboarding Process

Figure 1: Current Credit Application Process

 

2.2. Top Challenges in the Credit Application Process

The top bottlenecks for organizations in the credit application process are:

  1. The volume of paper that they need to process and maintain each month
  2. Incomplete and inaccurate financial documents that they receive from customers
  3. Manual data entry into spreadsheets and ERP systems leading to errors and wasted time
  4. Downloading credit reports from leading third-party agencies including Experian and D&B
  5. Calculating credit scores in excel spreadsheets
  6. Obtaining approvals on emails

2.3. How Leading Organizations Handle Credit Applications

The Online Credit Application Process

Figure 2: The Online Credit Application Process

Moving credit applications online, integrating them with credit agencies, and securing them with e-signature technology helps eliminate manual work and incomplete credit applications. An online application replaces a paper intensive credit management process with an electronic one to enable better credit portfolio and risk management and to quickly onboard new customers. Credit score and credit limits are calculated automatically while workflows are assigned to relevant credit managers to review and approve the assigned credit limits. Credit Review and Customer Onboarding Process

Figure 3: Credit Review and Customer Onboarding Process

Assigning the right credit limit to customers helps firms to collect payments on time, reducing DSO.

2.4. Online Credit Application Success Story: The adidas Group

The adidas Group has about 10 different credit application formats which are filled by customers for requesting lines of credit from its various business divisions around the world. In what was a very manual paper-based process, the credit team at adidas took more than four days to process a single credit application. In essence, what this meant was that the credit team was mostly focused on tactical activities while trying to get a complete credit application rather than spending it strategically on the credit review process. The Adidas group started deploying credit applications one by one at each of their business units. After deploying the HighRadius online credit application, the team was able to bring the new customer onboarding time to less than 2 days with more than 90% credit applications received with complete data on the first attempt. The end result was that the team was able to review more credit applications per given while using accurate data to reduce the credit risk exposure and alleviate the risk of high DSO due to wrongly estimated credit limits.

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HighRadius Credit Software automates the credit management process, enabling credit managers to make highly-accurate credit decisions 2X faster and enable faster customer onboarding with 4 primary components: configurable online credit application, customizable credit scoring engines, credit agency data aggregation engine, and collaborative credit management workflow. Along with that, there are a lot of key features that should definitely be explored some of which are online credit application, credit information aggregation, automated credit scoring & risk assessment, credit management workflows, approval workflows, and automated bank & trade reference checks. The result is faster customer onboarding, better internal collaboration, higher customer satisfaction, more targeted periodic reviews, and lower credit risk across the company’s customer portfolio.