Construction professionals at work

“What is the stereotype” for the credit risk professional?”  That is the question asked by Cortera on its Core Insights blog, and a question they posed to NACM Credit Congress attendees back in May.  The answer shouldn’t surprise many in the credit and collections industry, but it may serve as a wake up call for some.

Relationship-Based v. Data-Driven Credit Professional

Cortera created two fictional credit professional stereotypes: A “relationship-based” professional and a “data-driven” professional.  The differences between the characters was comical.  Identifying characteristics for the “relationship-based” professional, for example, included things such as “Master of Sales Prevention” and “Hasn’t changed way of doing business in 20 years.

Unsurprisingly, the winning choice of the conference attendees was the “data-driven” credit risk manager.  Surprising, however, is that the “data-driven” professionally only won the battle by a 2:1 margin.

In other words, roughly 33% of credit professionals out there put “remembering everyone’s name,” “regaling the office with his risk management wisecracks,” and “polishing his ’employee of the month’ (1997) award” as more applicable attributes to them doing their job than actually succeeding at that job.

I find it unsurprising that the credit risk management profession is changing, and that a data-driven and intelligence driven approach is getting wide adoption. It is a bit shocking of how entrenched and unwilling to change the minority stronghold is, however.

Cortera seemed to have seen this in the statistics and they politically indicate that they “don’t want to speculate as to what this means,” but they go on to seemingly speculate anyway (as they should):

…but with the squeeze on credit managers to do more with less combined with new technologies and better data sources, the profession may be turning a corner when it comes to assessing risk.

There are new available technologies out there that help credit risk professionals, and the profession is certainly turning a corner.  Cortera does a great job of outlining the mindset of a credit risk manager who is adopting the new technologies and succeeding. Their technology, in fact, brings business data to risk managers to help them make better credit decisions and monitor credit changes.

These technologies help credit managers do the first part of their job: using credit intelligence and procedures to avoid non-payment. The same thing experience is available to help credit managers do the second part of their job: taking action on non-paying accounts to avoid losses.

Automated Lien Compliance and Collection Steps

But what happens when an account slips through the cracks and goes into default? It is bound to happen.
When your relationships with customers begin your company collects credit information through a credit application, runs references and credit reports, and then monitors the health of that organization during the business relationship. There are lots of tools to help your company go through this process, which are referenced in parentheses in the previous sentence. These tools and processes are essential to minimize your DSOs and Percentages of accounts collected (hey, what’s more important of these two anyway?).

But what happens when an account slips through the cracks and goes into default?  It is bound to happen.

While the credit risk management profession has “turned a corner” with the credit managers first duty (i.e. credit decisions), I believe that a survey of the marketplace will demonstrate that vendors and organizations are far behind with the credit managers second duty (i.e. dealing with default accounts).  Again, however, new technologies are being developed and the industry is still “turning a corner.”  Here are a few of note:

Levelset:  Technologies to manage and automate Lien Compliance

Levelset was founded for the specific purpose of helping the credit risk management industry “turn the corner” with their second duty – dealing with default accounts. Nevertheless, while lien compliance is popularly considered a reactive tool to attack a specific default account, standardized lien compliance can be really helpful to reduce DSOs, make better credit decisions, and the like. In many ways, in other words, improving lien compliance for your company can help with both ends of a credit managers responsibilities.

But let’s get down to business. How do you manage the complex lien compliance environment?

That’s where Levelset steps in. The Levelset software has proprietary patent pending technology to electronically receive your project data and instantly make your company compliant with mechanics lien laws across the country.  The software can work with your ERP and basically take an enormous compliance nightmare completely off your company’s plate.

Funding | Gates: Managing  Your Receivables

Funding | Gates is an intelligent receivables management software that focuses on giving your company the organization and data it needs to take consistent action on aging or default accounts. Their software integrates directly with Quickbooks (more integrations coming soon, I’m sure), and includes powerful tools to automate the process of sending late-payment reminders, reminder invoices and letters, and the like.

BillTrust: Bill Better and Get Paid More Often

Bill Trust technology automates and optimizes the billing process. This is a bit different than the Funding | Gates and  Levelset because it isn’t directly focused on the credit or collections process. Nevertheless, experienced credit professionals will attest to the importance of quality billing practices. Spending time to implement a reliable billing process and platform can easily improve your DSOs and aging receivables – there is science behind it.  Bill Trust can automate your invoicing process and enable your company to send and process invoices online.

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