Every business wants to grow, but when your business involves providing credit terms or delivering goods and services before payment, it can be tricky to determine which businesses to work with and which to decline.  Historically, some large corporations have been wary of taking on small business clients who can be notoriously hard to evaluate due to having little or no information available on their credit files. Also, small businesses tend to be a volatile group – 49% fail in the first 5 years of operation. 

So, what’s the best way to find solid small business customers?  We recommend a 3-fold approach –

• Use blended data – a combination of business data and personal data on an owner or principal.
• Incorporate automated decisions that automatically approve accounts that meet your credit policy criteria and decline those who don’t. Manual review is reserved for middle-ground accounts, which saves you resources.
• Regularly monitor the health of our client portfolio with scoring and alerts.

Learn more by downloading our whitepaper with CFO.com , “A Widening Focus, Setting Your Sights on Growth Companies.”

Since fluctuations within the market or unexpected disasters can drastically impact your portfolio’s risk, it’s generally good practice to regularly review the level of exposure within your portfolio. Here are few evaluative questions you may want to consider:

• What is your exposure roll up by parent company?
• Do you have a high concentration of accounts by specific geographic locations that may be affected by common natural disasters?
• What is your estimated potential loss by industry if there is a downward turn in the market?
• Is there any noticeable credit limit or credit utilization trend within your portfolio?
• What is your average level of risk relative to the number of delinquencies and your aged accounts?

Evaluating your portfolio and answering the questions posed above can help you find unexpected risk as well as find ways to grow your customer base in more diverse industries or locations.

Most of us are pretty familiar with credit reports and scores, but how many of you are aware of the additional tools available to help you manage the entire credit risk lifecycle? I talk to credit managers everyday and as we’re all trying to do more with less, it’s easy to forget that opening accounts is just the first step. Managing risk on these accounts is as critical, if not more so, than opening them.

While others may choose to “ship and chase”, you don’t need to. Proactive alert/monitoring services, regular portfolio scoring and segmentation are key components that a successful credit department needs to employ in the constant battle against “bad” accounts. Use these tools to proactively adjust credit terms and limits, both positively and negatively. Inevitably some accounts will go bad, but using collection research tools for skip tracing and targeting services for debt collection will put you first in line for collections. A journey of 1000 miles begins with a single step; we have tools that can help you with that journey and all can be accessed online.