This is how you combat risk in changing times as a credit manager

Sharomy Autar
May 25, 2020 - Reading Time 4 minutes

While the finance department is faced with economic uncertainty, rising bankruptcies and fraudulent activity, the business continues. Credit managers are tasked with developing a strong, analytically driven credit management strategy that keeps the organization afloat.

In this blog we zoom in on how to establish a resilient credit management strategy for the long term, to keep your organization financially sound.

This is how you combat risk in changing times as a credit manager

Credit manager: the opportunity taker and opportunity scraper

The current situation creates a challenging period. It is the time of surviving, adapting, but not giving up. Chances are that your sales department is getting ready for the restart of the sales season. Bringing in new customers is a must to keep your company financially healthy.

As an organization, you don't want sales to invest in prospects that don't pass the credit check afterwards, which is perfectly understandable, especially in today's day and age. Does your credit department come around the corner as soon as the contracts are signed? that's way too late!

You should take a preventive approach and check prospects' financial health through up-to-date data. External data can help with this. For example, use payment history data that lets you know whether the prospects are paying other customers on time. The more you know about a potential customer at the beginning of the sales process, the better you can assess the risk.

So a good finance-sales marriage truly starts at the beginning. By mapping out the risks in advance, the account manager knows what negotiating position he is in and the prospect can be approached more personally. You also ensure that the sales team loses less time prospecting slow payers, defaulters and companies that have little potential to grow. Instead, they can focus on companies with good future prospects. For the account manager, this means more conversions (and perhaps slightly more important for them: more commission - show me the money!).

  • Know your potential customers: use up-to-date data to assess prospects' risks
  • By implementing a preventive risk approach, you avoid wasting sales teams' time

A changed situation demands a different approach

Above all, don't forget to keep monitoring your current customers. Make sure you know the risks in the market and act preventively here as well to prevent you from falling behind. Is one of your customers in a sector that has been hit hard by the crisis? It may happen that they are currently unable to pay the bills. Also make sure you check the risks of parent and subsidiary companies; a bankruptcy of one can lead to a greater bankruptcy risk of the other.

Do you spot a change that could affect the customer's payment term? Check whether your customers can still honor the agreements. By gathering information in advance and maintaining intensive contact, you can make better arrangements and monitor the impact on your portfolio.

As a credit manager, you want to be the first to know when a customer's financial situation changes. Monitoring can help you out here. In our blog "Three benefits of monitoring credit risk" we explain the benefits of real time monitoring the financial health of your customers using up-to-date credit information, predictive indicators, scores and alerts.

  • Understand the current risks in your current market and portfolio
  • Data from an external party helps to present an up-to-date overview
  • Having a clear picture of a customer's risk profile in advance helps in setting up new payment arrangements

Winston Churchill once said: 'Never waste a good crisis'. Make sure you eliminate the right risks right now. Start in time and make decisions based on the most reliable and recent data. The result? Sales can focus on profitable prospects and you are the credit management master that provides insight and efficiency.


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Credit monitoring

Opportunities for your organization in focus

A credit check at customer acceptance is valuable, but also immediately outdated. The real credit risk actually begins after you have accepted a customer. accepted. The solution: monitor the financial health of your customers in real time.

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Credit monitoring

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