Online Credit Application Health: Is Your Process Working?

When dealing with delinquencies and bad debt, most businesses turn to their collections process looking for performance gaps. But what if the issue is further up the process pipeline?

It all starts with your online credit application process. No matter how optimized your credit monitoring and collections process is, you are still at risk of cash flow inconsistency without a robust credit decisioning process. And the first step in assessing your online credit application health is determining the most critical KPIs. 

Credit Application KPIs

It’s important to utilize key performance indicators to benchmark your success–and opportunities for improvement–over time. Especially in a high-inflation, recessionary environment, it’s more important than ever to evaluate your business processes with an especially critical eye. 

Decisioning Timeline. How long does your online credit application approval process take? While this will vary industry-to-industry, it’s important to consider if there are any major inefficiencies or roadblocks. For example, if your decisioning process is largely manual, you could be wasting critical man-hours and increasing the risk of human error. By unnecessarily extending the credit application and decisioning timeline, frustration with your customers–and your team–can only add to the complexity of making smart credit decisions. 

Data Capabilities. How confident are you in your team’s contextual data visibility? A healthy online credit application process requires comprehensive data-driven insights that help you make smart, low-risk credit decisions. Robust credit decisioning software should provide you with seamless access to data from major credit bureaus and rating agencies to ensure you have all the context you need. 

DSO & Bad Debt. Is your days sales outstanding increasing? Are you experiencing more delinquencies? Days sales outstanding, or the number of days it takes for a business to receive payment on money owed, is a critical KPI for predicting cash flow and evaluating the success of past credit approvals.  As we head into an economic slowdown, it’s more important than ever to proactively monitor your DSO and identify optimization opportunities. 

Evaluation Process

Once you’ve identified your key performance indicators–credit decisioning timeline, data capabilities, and DSO–you can determine the health of your online credit application process. 

Start by evaluating your efficiency. Consider:

  • Is your credit approvals process taking up significant bandwidth?
  • Are there aspects of your credit decisioning that could or should be automated?
  • Is your credit decisioning timeline negatively impacting your clients? 
  • Do you have the ability to configure credit application templates as needed?
  • Is your customer onboarding process quick and easy for customers and your team?

By using these questions as a guide, you can identify critical efficiency gaps in your credit decisioning process and invest in solutions. 

Once you’ve evaluated your processes for efficiency, consider:

  • Does your team have the contextual data they need to initiate smarter credit approvals?
  • Does your credit approval process easily integrate with credit bureaus?

Finally, consider:

  • What is your DSO number, and how does it compare to industry benchmarks?
  • Are you experiencing an increase in delinquencies or bad debt?
  • Did your online credit application miss data insights that could have prevented delinquencies?

Once you’ve evaluated your credit application process and identified areas for improvement, quality check this with some general best practices. For any business, an effective online credit application process should:

  • Provide a good customer experience with quick turnaround and seamless customer onboarding. 
  • Heavily rely on data-driven insights to make decisions. The more data the better!
  • Leverage automation to streamline inefficiencies, accelerate the approvals process, and minimize risk.

If your current credit application process does not meet these standards, you could be missing out on time and cost savings while combatting unnecessary risk. 

Schedule a consultation with CreditPoint Software to learn how you can leverage the benefits of a highly configurable automated solution from credit applications to collections.