3 ways data helps manage customers through the credit lifecycle

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Risk is increasing on multiple fronts during what’s become a tumultuous time in business. Uncertainty in the UK economic outlook, insolvency rates hitting new heights, and increases in fraudulent activity are all putting pressure on credit teams.  

There’s a clear need to balance managing this risk with the need to grow, stabilise, or even survive in the current tough climate. 

Sitting on the sharp edge of these challenges, how can credit teams respond? 

First and foremost, a stronger understanding of the organisations you’re doing business with is the foundation to build upon. Customer data should be used to supercharge decision-making. By taking a more agile approach, only then can credit teams be best placed to respond to ever-changing external factors. 

A truly holistic view of the customer can both reduce risk as well as identify opportunities for growth, prior to signing contracts, through to building out existing relationships. 

In this piece we’re going to explore how credit teams can use customer data to their benefit. 

How customer data can influence the customer credit lifecycle 

 Stage 1: Onboarding 

Successfully onboarding customers is a key component for businesses focusing on customer experience (CX). It can be the difference between a customer staying with you for the long term or churning after a few months.  

But credit teams have a role to play here too. As part of the onboarding process, teams can assess the credit profile of any prospective business. By doing so, they can understand if the new customer falls within the credit provider’s range of risk appetite. 

 Looking at previous payment performance, adverse business events, and predictive scores can all be indicators of risk. All of this can easily form part of getting a new customer relationship off the ground – supported by quick and consistent credit decisions. 

It’s worth noting, it is also just as important to attract the right kind of customers you want to do business with. By not marketing business to high-risk customers, this avoids the wasted effort if the prospect is declined upon review.   

Data gives credit teams a top to bottom view of who they want to do business with.

Stage 2: Monitoring 

After onboarding is completed, the relationship joins the wider portfolio of existing customers which must be managed. When customers reach this stage in the lifecycle, data can be used to identify new opportunities as well as manage risk. When managing a portfolio of existing customers here are questions credit managers should keep in mind:   

  • How do you monitor your exposure to a particular customer?  

  • How often do you review your existing customers?  

  • How frequently do you adjust credit limits or payment terms for good customers? 

A real-time data view of existing customers on the book can flag indicators which suggest changes to their risk profile – for example if they’re missing payments with other suppliers. By spotting these signs early, it can allow credit teams to act or change direction with a particular customer if needed. On the other hand, if a change means a customer fits the right risk profile for the first time, this creates an opportunity to offer new credit options.  

Stage 3: Collections 

Not all customers will reach this stage. However, in these testing economic times, the likelihood increases. Many businesses are currently experiencing financial stress, and loan arrears rose significantly to the end of 2022, increasing to 2.83% compared with 0.7% at the start of 2000, according to the Commercial Credit Data Sharing Initiative (CCDS).  

Ultimately appropriate action may need to be taken when a customer fails to pay on time. 

How can data help? It can be used to assess the customer’s risk profile, giving a credit manager a deeper understanding of how likely they are to pay. The data picture goes beyond just the relationship with your business, so if they’re late paying another supplier, for example, this can indicate increased risk around their likelihood of paying.  

Data can help inform the collections team on what to do next, with actions dictated by context. So, for example, it might be that the customer just needs a gentle nudge or reminder to pay, while in other case more urgency may be needed to minimise credit losses.  

Making data your foundation to growth while reducing risk 

At a time when market conditions can shift in a split second, credit teams are on the front lines for mitigating risk and spotting new opportunities. The deepest, most complete picture of customers will help finance professionals navigate both the risk and reward of business today.  

Get richer data with a backbone that ties it together. Discover how customer data can reduce risk and improve business performance with D&B Finance Solutions. 

If you would like to get started with a small number of International or European credit reports only, you can now also order them online