Using automated credit checks to make B2B credit decisions

Credit check automation is beneficial for all types of companies that are looking to manage their financial risk effectively while growing their business. It helps businesses make better-informed decisions about their customers and suppliers, increases opportunities to engage with high-value customers, and provides reliable information to manage risk and credit exposure.

Credit checks are essential and should never be done in house. Credit check automation uses automation to verify a company’s identity and gain reliable recommendations about whether to approve or decline credit and how much credit to extend. This is all done in a short time (minutes or less!), right from someone’s desk. Credit check automation is a core part of having the right B2B credit management system and we’ll cover how this works.

Automation, credit scores, and credit limits

One of the key benefits to credit check automation is that it saves time and valuable resources. Manually checking the creditworthiness of customers and suppliers is a time-consuming and labor-intensive process. In fact, it used to take companies like Archipelago more than two weeks to run their credit checks on any existing customer! With credit check automation, this process can be completed in minutes, freeing up valuable time and resources that can be used for other business activities.

Automation, credit scores, and credit limits

Another benefit of credit check automation is that it provides businesses with up-to-date and accurate information about potential customers that they might sign on. Unfortunately, manual credit checks are often based on outdated or incomplete information, which can lead to inaccurate decisions. Worse, many companies have traditionally relied on guesses, gut instincts, or a salesperson's advice on who to extend credit to, and how much. That’s not a very data-driven approach and lead to potentially negative consequences for the customer.

Credit risk management simply can’t happen without accurate credit information. Credit automation uses real-time data from credit agencies and other sources, ensuring businesses have access to the most current and accurate information. And the good news? The right solution will provide relatively easy to access and use.

The basics of automated credit scoring

Although there are different credit scoring methods, they all aim to predict very important factors. These are loan performance, credit risk, a potential client’s likelihood of fulfilling their credit obligations, and the chances of both delinquency and bankruptcy.

The automated system uses an API to gather data from the main credit reporting agencies (credit bureaus like Experian, Dun & Bradstreet, and Equifax) and summarizes it. In the past, these credit checks were done manually, either in-house or through a paid agency. And we all know how difficult it is read an Experian report! Financial statements needed analyzing, risk assessments were done with varying accuracy, credit history was researched, and the decision process could take weeks to be finalized.

These delays could have a big impact on a sales force, which often needed to wait for a credit decision before knowing what they could offer a potential new client. It also significantly added to the onboarding process. And the process often had a negative impact on the customer experience.

Now, technology solutions like Resolve give businesses a seamless and simple net terms experience that includes automated credit checks. Resolve eliminates the complexity and risk of managing credit decisions and decision-making by automating underwriting and net terms enrollment to maximize revenue, fuel growth, and speed up invoice collections. When using a solution like Resolve, sales teams and their customers no longer need to wait to negotiate an agreement. With robust and reliable information, extending credit terms and credit limits is easy and effective.

Using credit check automation to identify ideal client borrowers

Now, lots of businesses are looking to move their credit management online. Businesses use credit check automation to identify potential financial risks and streamline the credit application process. Identifying customers and suppliers that may pose a financial risk is an essential process in protecting a business from bad debt. This information can be used to make better-informed decisions about whether to extend credit or do business with a particular company.

The process can also help businesses improve their cash flow and working capital. By identifying customers and suppliers that may pose a financial risk, businesses can take steps to mitigate those risks, such as by requiring pre-payment or setting credit limits. For businesses in industries that are expected to offer 30, 60, or 90-day net terms, cash flow is often a challenge. They’re essentially asked to behave like lenders or financial institutions. Thanks to credit check automation, the opportunity to restrict credit to companies that are likely to exceed their net terms means removing much of the risk (and labor) involved in bad debt.

The functionality of credit check automation is an essential tool for SMEs that are looking to manage their financial risk effectively. It saves time and resources, provides businesses with up-to-date and accurate information, helps companies to identify potential financial risks, improves cash flow, and increases profitability. By automating the credit check process, B2B organizations can make better-informed decisions about their customers and suppliers, and protect their finances, cash flow, and accounts receivable.

Interested in automated credit checks? Learn more about Resolve’s free business credit check and how you can start automating your process today.