Having quick and easy access to credit ratings and reports can give the finance departments many advantages, but how can the other departments use credit information effectively?
Three factors that take full advantage of the company's information in Online Credit Reports are: Sales, Procurement and Marketing. In addition, CEOs and other board executives are also using credit reports to track the acquisition targets as well as capture all competitors’ activities.
One of the biggest contradictions between sales and finance is the tendency to sell directly to the target customers but not sure about the possibility of bad debt. On the other hand, financial departments are operating based on the policy: reduction of bad debt – increase of profit. And to minimize the risk, the sales department uses online credit reports to check thoroughly before signing contracts with customers. Although this limits the prospect list, it helps to reach out for more concentrated and accurate target. Finally, the likelihood of creating bad debt will also be reduced and financial strength will also be strengthened.
Although the finance department is originally responsible for providing credit lines to suppliers, for potential IT or other service providers, professionals in other departments is also capable of handling this. However, before giving advice on who to work with, the purchasing department checks credit history first to ensure that they can minimize the risk of dealing with unreliable counterparts and avoid long-term supply agreements. Purchasing can identify more financially viable suppliers, who have a strong position in the supply chain, and are more likely to supply. Purchasing department should carefully review the credit rating, check if the board of directors have a clear history and the bills are paid on time.
One of the major pressures on the business during the economic recession is the need to create new businesses and continue to provide excellent service to the customers. Before sending large marketing campaigns to potential customers, the marketing department can use credit information to prioritize potential customers to ensure that they are able to pay for the products and services. Organizations can clarify the focus of their marketing plan by using potential customer data to identify and target trustworthy organizations in a variety of areas.
Board of Directors
BOD can thoroughly check the potential targets (to plan for acquisitions) or competitors by using credit reports from the finance department. This information can be used as part of the appraisal process (by due diligence) or by researching a company that has appeared to be competitor. A credit report can tell you who they are, where they are from, what they are doing.
BOD usually eyes on issues such as money laundering and how to capture information related to the supply chain and the customer. Seeking the international supply requires ensuring compliance in labor issues such as bonded labor, underage labor and excessive working hours. Today's supply chain management requires more than just turning around the supply target with the lowest cost possible.
Looking to the future: how to integrate credit information into the organization's DNA system?
From a stand-alone tool which is used by finance departments, credit information gradually shapes processes and applications made by other departments within the company. When a company decides to improve its operational efficiency through the use of credit information, it also needs to apply this uniformly, following these steps:
1. Identify which parts should be involved and where improvements can be made
2. Appoint the best staff from each department to train on the credit information system and ensure that they understand what they are looking for.
3. Build credit checking into each relevant process – for example, a new contract cannot be signed by sales until they carry out a check
4. Ensure two-way communication between finance department and each functional department so that potential risks are reduced
5. Measure indicators, such as bad debts and credit notes over time to identify the ongoing value credit information is bringing to the business
Source: Courtesy of Creditsafe