What does an effective Credit Management System look like?

A credit management system is the business process for handling credit accounts, from credit approvals to assessing risk. This process can be time-consuming. Identifying an effective credit management system can help minimize future time spent on manual processes, and improve the build out of future steps of automation. 

Credit management processes significantly affect the growth and development potential of any business to be financially productive. But in a market full of “best practices”, how can we identify what makes an effective credit management system? 

An effective credit management system includes all-inclusive credit decisioning, frequent alerts, and continuous credit risk monitoring. 

Data-Driven Credit Decisioning:

When deciding on approving an application, a business needs to take a strategic, all-inclusive approach. Contextual data is critical to accurately assess the likelihood of delinquency. Unfortunately, considering all data can be tedious and time-consuming. Choosing an automated credit management system can alleviate time taken towards manual credit decisions, reduce time spent on manual tasks, and improve productivity for your team. 

An effective credit management tool provides analysts and managers with the flexibility to create unique credit applications and scorecards to improve the accuracy of the credit decisioning process. 

Frequent Communication and Alerts:

Past the initial application process, proactive credit risk monitoring requires frequent check-ins and transparency with clients in order to proactively mitigate risk. It’s crucial to keep clients notified of upcoming payments to effectively monitor account activity. Analysts should be alerted of changes in customer behavior  or new risk. Keeping up with this process manually can be tedious. Fast-growing businesses must cut down on communication time with clients in order to scale resources, but this can lead to an increase in days sales outstanding (DSO) and can negatively affect cash flow.

An effective credit management system should include automated alerts, frequent status updates, and clear communication. Enabling automated triggers to alert analysts and managers can help keep accounts up to date, reduce DSO, and contribute to a better portfolio management system. 

Continuous Credit Risk Monitoring: 

Managers and analysts continuously monitor account activity to mitigate risk further. Keeping current with credit limits helps managers stay in tune with account behavior that can result in bad debt if not monitored. 

So what does continuous credit risk monitoring look like in an effective credit management system? Proactive monitoring includes comprehensive visibility of all accounts and updates on the behavior of these accounts. Continuous monitoring gives visibility on well-standing accounts, allowing analysts to easily find room for customers that need attention. Insights on underperforming accounts is key to portfolio management. This process can be tedious, but with an effective credit management system, businesses gain user-friendly insights and more time to focus on high-priority tasks. CreditPoint provides a fully automated, real-time account monitoring tool to help analysts increase day-to-day productivity with real-time visibility. 

Benefits of an effective credit management system

By managing credit risk, a company can reduce DSO, lower the risk of bad debt and maintain a steady cash flow. According to Smartsheet, 86% of respondents say automation in the workplace makes employees more efficient and productive.  Leveraging an automated  credit management system transforms your business through:

• Increased team bandwidth and less turnover 
• Minimized Risk 
• Increased customer satisfaction
• Data-driven, accurate decision-making

Solution:  

CreditPoint’s configurable credit management system can automate the entire credit process to enhance customer satisfaction, optimize internal processes, and minimize risk. In a volatile market, it’s more important now than ever to leverage an effective credit management system. Request a consultation to learn how CreditPoint can help optimize your credit management system today.