Building trade credit relationships with customers and prospects is an ongoing process. When used the right way, business credit information is a very powerful and completely necessary tool for success. Business credit is the information that allows credit and risk managers of all types of companies avoid risky relationships, determine how much credit to extend to other businesses, and decrease the amount of time spent on manual processes.
Avoid Risky Relationships
Investing in the right business intelligence helps you steer clear of risky relationships. Unfortunately, there are many unqualified and even fraudulent businesses in the world that will try to take advantage of your assets by requesting trade credit. If you loan out free products or services to any business that is not in the position to pay you back, you’re putting your business at risk for a major financial loss. If you don’t invest in the right tools, you won’t be able to identify these risky relationships.
There are many ways that commercial credit bureaus allow you to avoid risky relationships. First, you can take advantage of a credit monitoring service which will send you daily, proactive email alerts on any key changes in your customers’ behavior. By taking this proactive rather than reactive approach, you position yourself to stay ahead of the game rather than trying to put out a fire once it’s already lit. Next, you can access information on nearly any business throughout the U.S. by pulling a business credit report. Cortera’s reports provide you with information on a businesses’ financial past along with insightful outlooks to their future through a combination of both purchase behavior and payment trends.
Understanding business credit scores and the factors that weigh in gives you a cutting edge in avoiding risky relationships for ongoing portfolio management.
Extend the Right Amount of Credit
In order to extend an appropriate amount of credit, you need to have all of your financial information in one place. This includes payment scores, purchase behavior information, predictive risk scoring, family linkage, etc. All of these factors need to come into play when determining credit limits so that you as a risk management professional are seeing the full picture. Without all the pieces to the puzzle, you could be missing a major red flag, or growth indicator, leading you to extend too much or too little.
If you’re a creditor, you should be running reports on every business you consider working with. Companies are more likely to pay on time if they know that their information is being monitored and reported. If you’re the creditee, you should request that your suppliers report your payment activity to commercial credit bureaus like Cortera. This will ensure that your company is being represented in an accurate and up-to-date light, and that you’ll be able to build trade credit as you continue to grow.
Cortera’s decision-making software is called Cortera Decisions. The system pulls the data from our customer’s A/R contributions and feeds the data into the scorecards. In just 3 easy steps, you can create a scorecard, search for the business you want to score, and run a credit decision which will not only spit out an approval status but also recommended credit limits. Staying within those ranges will ensure that you haven’t over- or under- loaned.
Decrease Time Spent on Manual Processes
With so much technology in today’s business environment, it’s silly not to take advantage of all that a commercial credit bureau can provide. Credit monitoring tools and decision automation platforms allow businesses to spend less time on manual reviews and more time on what matters. Any task that is labor-intensive is also time consuming, and in the B2B credit world it is time taken away that we simply don’t have to give.
Cortera Pulse, Cortera Decisions and eCredit are fully automated tools to help you decrease the amount of time spent on manual processes. Through these two simply yet highly effective technology platforms, you can keep an eye on your current customers while making decisions on which new ones to approve all in a fraction of the time. Rather than investing in a new employee or having to hire a collections agency, you stay in control of your business’s overall credit and financial risk.
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