Martin de Heus, VP Direct Sales Onguard

There was a time when the idea of segmenting and profiling was purely exclusive to the marketing departments of the world.

However, as technology has naturally grown and evolved, so has this perception. Anyone who still holds on to the belief that these tools are limited only to marketing departments is very much out of date with the latest methods of credit management. In fact, credit managers can learn a lot from their marketing colleagues.

The technique of splitting customers into groups based on different characteristics has long been used in marketing to better target products, services and information to the relevant customers.For credit managers, leveraging important information and data to split customers into groups based on different criteria can revolutionise finance departments and result in a smoother, more efficiently run finance department.

As recent trends have shown across practically every sector, there is no longer a ‘one-size-fits-all’ approach to credit management. Whilst we may all be using the same software and hardware, they need to be intelligently tailored to each environment. One vital need here is the need for information, customer information. Most credit departments will outsource this, pulling in expertly compiled reports that analyse and assess a business’ or individual’s financial health. Although, one huge area of information that is commonly overlooked is the data that these departments record on a daily basis.

For example, as individuals communicate differently with each company they speak to, your customers will be doing the same with you, showing completely different behaviours with you than they do with other businesses. Are you truly making the most of that information?

Although setting the same payment terms for every customer and then sending debt collection letters to everyone who misses the payment period might have once seemed like the most straight-forward approach to credit management, it is by no means the most effective.

Fortunately, all of the information you need for efficient profiling and segmentation is right at your fingertips. The next challenge is to leverage that to your advantage. A simple way to start this is by using factors such as business size, industry, location, purchasing habits and creditworthiness to differentiate your client portfolio into a set of homogeneous groups. While this might seem like a big task at first, segmenting your customers into groups will pay dividends in the long run. From here you can then piece together a strategy which will enable faster payments from each group.

By splitting your portfolio like this, you can quickly identify which customers may need extra attention and which do not, further increasing results across your entire client base, and produce tangible improvements in the decision-making process.

In turn, the insights gained from this approach will allow credit managers to more quickly access information, manage risk more effectively, reduce bad debt and improve communication. This approach will also allow credit managers to get a better understanding of their customers’ capabilities and determine which processes of credit management would be best suited. This strategic approach to credit management will also enable finance departments to adjust credit and collection policies which could ultimately increase cash-flow.

No matter the product delivery, each process involved, from marketing to sales will all conclude at credit management. If you disrupt the generic communication here from the traditional one-way, reactive approach and change this to a more positive, two-way dialogue, it is far more likely that your customer will order again. This further proves that those involved in your credit department need to know as much as they can about the customer so as to provide an individual service style that will not only help your customer but help your company.

The benefits of introducing segmentation and profiling to your company not only include saving time and increasing cash-flow, but it also increases the potential of working more closely with other departments and strengthening inter-department relations and knowledge sharing. Working more closely with the sales department can help you get a greater understanding of your customers, many of whom they will deal with on a regular basis and can result in previously undiscovered insights. Remembering to perform regular check-ups of your segmentation will prevent you from investing your efforts in the wrong things and ensure that that the profiles you create remain relevant.

By following the lead of marketing departments, it is possible to turn more in-depth insights and analysis into customer portfolios into specific actions which will be more effective than a ‘one-size-fits-all’ approach. Ultimately, by taking advantage of these existing marketing tools, you will better understand your customers and achieve a more accurate future view of your company’s finances.