Customer credit risk has become a major concern in the new normal. Even companies that were financially sound before the start of the recession are struggling to survive until the economy recovers. In this challenging and uncertain environment calculating and monitoring customer credit risk is essential to protecting your company’s cash flow.
Calculating Credit Risk
Credit risk is directly correlated with a number of factors including:
- Years in business
- Financial strength
- Supplier payment history
- Loan payment history
- Bankruptcies, liens, judgements
- Available credit
The best way to distill these separate but related pieces of information into a tool for calculating credit risk is to develop a custom credit scoring model.
A custom credit score can be tailored to include the factors which give the best reading of your customers’ credit worthiness. Some things to consider in developing a custom credit scoring model include:
- Factors that give the best picture of your customers’ credit health
- Value and weighting to be assigned to the factors in scoring model
- Ease of updating the factors to keep credit scores current
- Convenient display of credit scores for easy reference by your team
- Automation of credit score calculations to increase efficiency
Monitoring Credit Risk
Monitoring credit risk is done more efficiently and effectively with automated credit and collection solutions. Lockstep Collect has a number of solutions which can help you monitor credit risk including:
- Custom Credit Scoring Model: Calculates credit score based on values and weighting assigned to factors you think are the best indicators of your customers’ credit quality.
- Dashboard Reporting: With a glance your team can see a customer’s account status, custom credit score, days past due, available credit, D&B, Experian, TransUnion; and whether the account usually pays on time or late and by how many days.
- Color Scale Ranking of Credit Quality: A color scale of credit quality which pops up when searching for a company in Lockstep Collect.
- Automated Customer Communications: Automated emails or text reminders based on the status of customer invoices.
- Activity Management with Smart Activities: Prioritizes activities for your team based on account information.
With credit and collection solutions from Lockstep Collect your team can work more efficiently and effectively; freeing up time to make more customer contacts and increase collections.
Lockstep Collect, a leader in cloud-based credit and collection platforms, provides automated solutions for effectively and efficiently managing credit. Lockstep Collect is an experienced software partner that can help you navigate the challenges of credit risk in the new normal.
If you would like to learn more about how you can benefit from automated credit management solutions, please contact Lockstep Collect at www.lockstep.io.
