The risk of exposure is rising in several aspects during this turbulent business period. There is uncertainty about the UK economic outlook, the rate of insolvency rising to new levels, and an increase in fraud are all placing pressure on credit management.

There’s a need to manage this risk and improve, stabilize, or survive the harsh climate.

At the cutting edge of these issues, What can credit departments do to react?

The first and most important thing is having a better understanding of the organizations you do business with will be the basis for building. Customers’ data must be utilized to enhance the decision-making process. If credit teams adopt a more flexible strategy, it is only when credit teams will be better placed to adapt to changing external influences.

A holistic understanding of the customer’s needs can reduce risk and find opportunities for growth before signing contracts and developing existing relationships.

This article examine how credit departments can use customer data to benefit their customers.

How can customer data impact the life cycle of credit for customers?

Stage 1: Onboarding

It is essential to ensure that customers are onboarded successfully. An important aspect of any business that is focused on the area of customer experiences (CX). It could be the difference between staying with you longer or turning away after a few months.

However, credit teams also have an essential role to play as well. In the onboarding process, they can evaluate the financial profile of any potential business. This way, they can determine whether the prospective customer is within the credit provider’s risk-taking spectrum.

Reviewing past payment performance and other business-related events that have caused disruption and even predictive scores can indicate risks. This can all be used to get an existing customer relationship in place – backed by swift and reliable credit choices.

It’s important to note that finding the kind of clients you wish to conduct business with is crucial. If you don’t market your business to high-risk customers, this will save you time and effort when a prospect is rejected at the time of reviewing.

Data provides credit departments with an overview from top to bottom of the people they would like to deal with.

Stage 2: Monitoring

After onboarding is complete, The relationship will be added to the more extensive portfolio of customers, which needs to be taken care of. At this point in their lives, their data can be utilized to discover new opportunities and control the risk. In managing the portfolio of customers, here are the questions credit officers should be aware of:

• What are the best ways to monitor your relationship with a specific client?
• How often do you check in with the customers you have already served?
• How often do you change the credit limit or terms of payment to ensure that you have excellent customers?

Real-time data views of current customers on the book could reveal indicators indicating that they may need to alter their risk profile, for instance, if they cannot make payments to other providers. If these signs are identified early, credit teams can intervene or alter their approach to one particular customer if required. However, if a change signifies that a person has the correct risk profile the first time around, it is a chance to provide various credit alternatives.

Stage 3: Collections

Few customers will get to this level. However, in these challenging financial times, their probability is increasing. Numerous businesses are currently suffering from financial strain, and the number of loans in arrears grew dramatically by 2022’s end, rising to 2.83 percent, up from 0.7 percent at the beginning of 2000, as per the Commercial Credit Data Sharing Initiative (CCDS).

In the end, the appropriate course of action is likely in the event of a situation if a client fails to pay in time.

How can data be used to help? It is a way to determine the risk of a customer’s profile, giving a credit manager a greater understanding of the likelihood they will pay. The data analysis goes beyond only the relationship to your business. So when they are late in paying a supplier, for instance, it may indicate a higher chance of being able to pay.

The data can inform the collection team of what next steps to take, using actions based on the context. For example, d want a gentle push or reminder of when to make payment. However, more urgency is required to limit credit losses in other cases.

The foundation of your data is to increase your business while minimizing risk.

At a time when markets can change drastically in a matter of seconds, the credit teams are at the front lines to reduce risks and spotting opportunities. The most thorough, complete image of customers can aid finance professionals in navigating the risks and rewards of the business world today.