Managing business credit accounts one by one is fine for a company with a small number of customers, but for those with hundreds of customers, it’s just not sustainable, according to Dun & Bradstreet.
Credit managers charged with managing hundreds or even thousands of accounts will be quickly overwhelmed if they can’t get a bird’s-eye view of the goings-on.
Unfortunately, many credit managers have found through experience that such reactionary credit processes can stymie collections efforts and increase bad debt when additional resources are needed to chase customers for payment.
However, managing credit at the portfolio level provides a strategic view of a business’s entire account base, allowing credit managers to understand the impact of their credit policy, regardless of their portfolio size. Segmenting the portfolio reveals insight into which customers are paying late or which customers are at risk of paying late. Further segmentation, such as industry or country, for example, allows for a real risk map to be built to prompt optimal actions such as managing at-risk accounts by prioritising collections or altering terms. Alternatively, positive, low-risk accounts can be identified highlighting where more favourable terms could be focused.
Credit portfolio management benefits:
• Credit control and collections teams operate at a more strategic level
• Trends and benchmarking data aids management decisions
• More effective interaction with sales
• Optimised account management
• Regulatory reporting and compliance is improved
• Highlights risks and opportunities across corporate heirarchies
• Immediate insight on new accounts introduced from mergers, and acquisitions, partnerships etc.
• Enhanced risk insight reassures banks, insurance companies, etc.
Managing credit risk with deeper and wider insight
By leveraging the depth of D&B data combined with cross-portfolio insight, credit professionals can better understand emerging risk patterns enabling them to adjust their credit and collections policies and also making more authoritative decisions when extending credit to new customers.
Three essential tools to enable successful portfolio management.
Whilst credit managers use portfolio management to identify growth opportunities and to better understand total risk, they also need appropriate tools for an efficient and effective process. Three examples are:
Simply looking at payment trends may miss potential future risks. Portfolio analytics assist in prioritising the review of potential high-risk customers and customers with additional spend capacity, which allow credit managers to increase credit limits when appropriate.
Dun & Bradstreet’s credit solutions issue email and in-systems alerts when a customer has had a credit score change, is the target of a lawsuit, has moved, was recently purchased by another company, etc.
In addition, Dun & Bradstreet’s credit solutions enable managers to segment customers by data elements such as business size, industry, or location, supporting a strategic level profiling of their customer base.
Dun & Bradstreet’s credit risk management solution, D&B Credit, provides industry-leading data and analytics to help you segment and manage your customer portfolio more effectively. For a 30-day free trial of D&B Credit, please click here.