What is Credit Management Application

What is a Credit Management Application?

Credit management application is the tool used to process customer credit. This includes sending out a credit application form to customers or prospects, reviewing the form details, implementing external credit review systems, assigning available credit, monitoring credit usage, and renewing the credit limit for relevant customers. The external credit review alone of a customer will need to determine whether or not the customer has ever filed for bankruptcy; their credit score from a reputable third-party credit agency; how long the business has been in operation; the stability of the company’s industry; if the company has engaged in any fraudulent activity; and other factors as well. Since all of this information needs to be continually reviewed, automated credit application management is critical as it verifies this information in near real-time.

Embracing Financial Success with Credit Application Management

Credit application management has a number of benefits over traditional manual systems that help build stronger business relationships, improving your cash flow and minimizing debt. This in turn allows your organization to gain a better picture of its overall financial situation so that they can make sure that the company’s cash inflows exceeds (or equals) its cash outflows.

The benefits include:

Greater visibility. Centralizing data in one place allows for a reliable audit trail, resulting in better business decisions. allowing greater trust between users and payers, facilitating better business relationships.

Automation. Reduce the administrative effort needed for processes that can’t be managed manually, such as keeping track of all credit requests and credit limits in real-time.

Better communication with customers. Having greater visibility and access to accurate data gives credit managers better tools for dispute management and prevents customers from buying goods or products over their credit limit.

Streamlined credit management. Seamless connection between your credit monitoring tool and A/R management tool allow you to leverage data between different aspects of A/R, such as collections and payment, for a more customer-centric approach.

Customer segmentation. With the right credit application management solution, you should be able to segment customers according to their payment history, creditworthiness, and customer risk. Companies can also use this information to better determine which customers should be prioritized in their collections efforts.

The Future of Credit Application Management

Traditionally, credit management for A/R has been a cumbersome, time-consuming process that is prone to human error. First, a credit policy has to be established. Next, customers need to fill out a credit application, while the company conducts research on their credit history. This due diligence, a time-consuming process, is necessary for each new customer that onboards. Finally, often after a few days or more, the credit request is approved or denied. This process needs to be continually updated as a customers’ credit is dynamic rather than static. In a future world where financial institutions are embracing autonomous finance, your A/R department should consider credit management tools that simplify this process, using machine learning and artificial intelligence as part of their credit management insights.

With a credit application management solution that centralizes all credit-related data, you’ll save time and resources. You’ll also have the data in one place, enabling you to easily optimize your credit management strategy, allowing you to minimize risk of bad debt, leading to a more stable financial situation for your company. When your company is optimizing its A/R and making better business decisions, you’ll also have happier customers who continue to buy your goods and products.

How Gaviti Helps Your Credit Management

A credit application management solution works best when it is part of an entire A/R invoice-to-cash system. In this ideal scenario, data from all areas of the A/R management process can be leveraged to optimize the efficiency of the team. For example, a credit application management solution would take data from the collections module to continually update the customer’s credit limit in near real-time, making sure it doesn’t grant more credit beyond what has already been approved.

Gaviti’s credit application management module works together with your A/R management to streamline the credit management system, including the credit request and approval process, credit limit setting and centralized analytics. This allows you to compile a reliable audit trail, centralize your visibility, reduce administrative overhead and strengthen your business relationships.

Want to learn more about how to automate your credit application and improve your cash flow?