Top 10 Tips for Managing Your Trade Credit in 2014

By Michael Feldwick, Head of UK and Ireland at Tinubu Square, www.tinubu.com

1) Signs of economic recovery should be treated with caution. Trade credit may well become more widely available in 2014, but it is crucial to exercise robust financial management and not to overstretch limits due to an improving market. Don’t overtrade and remember recovery never follows a straight line.

Top 10 tips for managing your trade credit in 2014

2) Make sure you use specialist software to provide you with detailed intelligence on the financial health and credit worthiness of customers. You must know what the outstanding risks are, what the total customer debt amounts to, and which customers represent the biggest risk in terms of recovering the debt.

3) Make credit assessments based on real-time data. The financial health of a customer last month will not help you to assess the security of their debts right now. Immediate visibility lets you understand your exposure instantly and if a customer slips from low or average risk to high risk, you can adjust credit limits until their financial position improves.

4) Timely data also means that you can manage risk according to your own appetite. If you know that you can hold the value of customer debts, sustain cash flow and accurately forecast, you are in a stronger position to make decisions.

5) Use credit management to improve your value with your stakeholders including credit insurers. If you have an accurate picture of the security of your debts and have built a good record —fewer days outstanding and fewer customer defaults— your business becomes more appealing and attracts better rates from credit insurers.

6) Integrate your credit risk management software solution. This means that everyone from back-office financial to front-line CRM systems works with the same information—from lead generation, to closing a sale, to follow up throughout the entire order-to-payment cycle.

7) Use this increased awareness to assess whether high-risk customers should be on your prospect lists and focus sales efforts on the strongest, high-value opportunities that will actually deliver fast, full revenue recognition. Sales teams will be tangibly more productive and the company will be focused on maximizing profitable sales.

8) Are you looking to expand into new markets? Growth in new, unfamiliar territories such as Asia, South America and Russia may increase your risk exposure. It is crucial to determine the credit risk of potential buyers operating in these areas based on “on the ground” intelligence. To do this, ensure your software solution synthesizes daily intelligence from global sources, and not just local.

9) Use your trade credit intelligence to improve your own business opportunities. Apart from enabling decisions to be made about which customers to trade with or extend credit to, this data can also be leveraged to guarantee bank credit and reduce borrowing costs.

10) Select a trade credit management software solution that can be easily integrated into your existing IT set-up, such as a cloud-based product. By doing this you will minimise your initial costs, cause little to no disruption, and you can start benefiting quickly.

By Michael Feldwick, Head of UK and Ireland at Tinubu Square, www.tinubu.com

1) Signs of economic recovery should be treated with caution. Trade credit may well become more widely available in 2014, but it is crucial to exercise robust financial management and not to overstretch limits due to an improving market. Don’t overtrade and remember recovery never follows a straight line.

Top 10 tips for managing your trade credit in 2014

2) Make sure you use specialist software to provide you with detailed intelligence on the financial health and credit worthiness of customers. You must know what the outstanding risks are, what the total customer debt amounts to, and which customers represent the biggest risk in terms of recovering the debt.

3) Make credit assessments based on real-time data. The financial health of a customer last month will not help you to assess the security of their debts right now. Immediate visibility lets you understand your exposure instantly and if a customer slips from low or average risk to high risk, you can adjust credit limits until their financial position improves.

4) Timely data also means that you can manage risk according to your own appetite. If you know that you can hold the value of customer debts, sustain cash flow and accurately forecast, you are in a stronger position to make decisions.

5) Use credit management to improve your value with your stakeholders including credit insurers. If you have an accurate picture of the security of your debts and have built a good record —fewer days outstanding and fewer customer defaults— your business becomes more appealing and attracts better rates from credit insurers.

6) Integrate your credit risk management software solution. This means that everyone from back-office financial to front-line CRM systems works with the same information—from lead generation, to closing a sale, to follow up throughout the entire order-to-payment cycle.

7) Use this increased awareness to assess whether high-risk customers should be on your prospect lists and focus sales efforts on the strongest, high-value opportunities that will actually deliver fast, full revenue recognition. Sales teams will be tangibly more productive and the company will be focused on maximizing profitable sales.

8) Are you looking to expand into new markets? Growth in new, unfamiliar territories such as Asia, South America and Russia may increase your risk exposure. It is crucial to determine the credit risk of potential buyers operating in these areas based on “on the ground” intelligence. To do this, ensure your software solution synthesizes daily intelligence from global sources, and not just local.

9) Use your trade credit intelligence to improve your own business opportunities. Apart from enabling decisions to be made about which customers to trade with or extend credit to, this data can also be leveraged to guarantee bank credit and reduce borrowing costs.

10) Select a trade credit management software solution that can be easily integrated into your existing IT set-up, such as a cloud-based product. By doing this you will minimise your initial costs, cause little to no disruption, and you can start benefiting quickly.