Credit risk management and customer portfolio management can help businesses perform at their best. Why? Having software to mitigate risk, automate credit scoring, and accelerate the credit application process can streamline your path to growth.
That said, in our 20 years of experience, we at CreditPoint Software have seen some common credit risk management mistakes that can cause future headaches. Below are the 4 most common credit risk management mistakes and how to solve them. For more information on our highly-configurable credit risk management solution, check out our page here.
1. Not Automating Your Processes
The first mistake credit managers run into are the strains of a manual process. Without a centralized and automated place to store customer data and keep track of account status, credit analysts are spending more time finding data, and less time on selling more to your good customers and pricing risk into your riskier accounts. Manual processes generate solid decisions in most cases, but the opportunity cost of lost time is immense.
By automating credit risk management, time is saved and the assessment of risk is swift and thorough. CreditPoint Software’s credit risk management solution creates configurable scoring models to standardize reviews and better monitor customer credit risk through increased transparency.
2. Lack Of Important Alerts and Triggers
The second common issue we have seen with credit risk management has been lack of important alerts and triggers that signal to your credit analysts when something changes on a customer account. Without alerts reminding your team about issues such as rise in late payments, a change to a bureau report, or a bankruptcy filing, these important events can go unnoticed.
Enabling automated triggers that alert your credit analysts and managers of important events can help keep accounts up-to-date, reduce overall DSO, and contribute to a better portfolio management system. Credit risk management automation is especially useful for scaling companies that find their portfolio size outgrowing their current staff. With automation, your team members will be able to manage accounts proactively and alleviate the cost of adding staff to react to growth.
3. Lack of Monitoring
Without credit monitoring and credit risk scoring, your customer accounts can be subject to risks that could be otherwise be prevented . Managing a large portfolio can be extremely labor-intensive if you don’t apply business rules to perform annual reviews and monitor changes in your accounts. .
CreditPoint Software’s solution allows for better credit risk management with the ability to leverage data from multiple credit bureaus and rating agencies to get the most accurate representation of credit risk. Our solution is easily integrated with many credit bureaus and reporting systems that allow for real time data to assess risk. This helps you prioritize your time and efforts on the minority of customers that may need manual review and a higher level of attention.
4. No Segmentation
Throughout this article, we’ve stressed the significance of using automation to create a more organized approach to credit risk management. The last issue we have seen is not segmenting portfolios with similar patterns. Credit risk management is about reviewing accounts regularly to prevent issues in the future, but it is also about successfully optimizing account performance with the metrics gathered in the credit risk reporting process.
CreditPoint’s solution allows you to gain keen insight into operational performance that improves the overall productivity and efficiency of your accounts by analyzing patterns and taking a proactive stance.
For all the issues mentioned in this article, each has a viable solution. Automation and increased transparency through data insights is the key theme that can help credit analysts and managers better assess credit risk and improve the customer experience this year.
Our mission is to provide the most comprehensive commercial credit risk and collections management solution available on the market. Schedule a consultation with CreditPoint Software to learn more.