Credit scoring allows a company to pay closer attention to customer risk while still getting the deal done.
by Alex Coté, Cortera
For many companies the financial health of their customers is worse today than it was a few years ago. With many banks unable or unwilling to lend, distributors are finding themselves waiting longer and longer to get paid as customers slow payments in an effort to manage their own limited capital. Given the cash flow and credit crunch, taking on new customers is critical to making up the difference,but it also runs the risk of exacerbating the problem, as an expanded portfolio runs the risk of carrying tomorrow’s slow payers,nonpayers, and bankruptcies. So how can a distributor maximize sales performance and optimize cash flow while not taking on an overly risky group of customers? The answer lies in a few precautionary steps that any distributor—from large to small—can follow.
Just like the credit reports and scores that exist for consumers, a business credit report and score is based largely on the organization’s past history of paying its bills. For those companies that deal largely with private organizations (which are often quite small), a credit report and score is often the best method for:
- Understanding the potential risk of not being paid in the future
- Boosting sales productivity by helping to identify and target the most financially sound customers as well as those that are likely to be in trouble
- Providing an assessment of existing customers’ collective payment histories,which can help with developing both new business and fine-tuning collections strategies
-To learn more about Cortera’s credit scoring please click here: Cortera Trade Credit Solutions