Abroad, there are many opportunities and possibilities for business. It doesn't matter if your relationships are in a city, country or globally because Dun & Bradstreet has the data, analytics and insight to help your most profitable relationships grow even further. By combining our insights with your own knowledge, we facilitate a global and unified view of your customers.
Last month, on behalf of the head office of one of our clients, I had the opportunity to visit their subsidiary in Istanbul to talk more about International Business and how to deal with credit acceptance. It makes quite a difference whether you grant trade credit to a company in the Netherlands or in Turkey. The risk you run is very different and must also be approached differently, but where do you start?
Step 1: Who are your customers?
In order to properly predict the impact of a new or existing business relationship, historical behavior is very important. But with a new relationship or when existing information is not uniformly anchored in the right way in the own systems, making a prediction becomes a lot more difficult. When this customer information is lacking in the organization, it is wise to approach an independent party such as Dun & Bradstreet, which has the largest Worldwide Companies Database.
The first thing you start with is identifying the right relationship. Does the customer information match the database? If not, it is important to complete this information. Once your database is cleaned up, it's time to add valuable financial information. Many companies are surprised when they are confronted with the outstanding risk. Now that the credit risk has been identified, it is time to make plans to reduce the outstanding risk.
Segmenting your relationships.
Now that you have gained insight into the existing customer base, it is time to categorize the customers according to risk. When determining the risk, we look at the geographical characteristics, how the group structure is built, in which industry the company operates, how they are doing financially and how they pay their invoices. Your customer database is now up-to-date, enriched and segmented according to risk, but what next?
Step 2: Checking existing and new relationships
There are several ways to get you to take responsible business risks using Master Data. I apply three levels of support in this regard.
- Periodically screening existing relationships via bulk delivery via Excel. The data is matched and then provided with the necessary data elements. This is a fairly labor-intensive job and each time a snapshot.
- A standalone solution where all existing and new relationships can be searched, stored and monitored. When you start monitoring a relationship the platform will generate a credit report. Then you can monitor the relationship in 24 hours a day so that you are informed daily about changes in the creditworthiness and can switch to reduce the risks.
- At the highest level, we link our business database to your customer system. We ensure that both systems are always communicating with each other. The customer data is always up to date and provided with the latest financial information. There is almost no human intervention involved.v
You currently have insight into existing relationships, are able to check new relationships for creditworthiness and spot opportunities, but how can you do business responsibly with a relatively unknown new relationship?
Step 3: How do you take (international) credit risks responsibly?
When determining the best way to do business, you will probably think that each customer is unique. But is this really the case? When you store data for a longer period of time, in Dun & Bradstreet's case 175 years, it turns out that companies are not unique at all and show certain patterns. Everything that happens to one of your customers has already happened to another company in the past. Dun & Bradstreet uses these years of experience to make a prediction about the future behavior of your relationship and to indicate the risk of default and/or bankruptcy in the next 12 months.
We are happy to help you make the right decisions.
The above-mentioned client wanted to implement a Global credit management policy in order to reduce the risks of outstanding credit. It was important to work globally and uniformly without losing sight of the unique characteristics of the country or market. In view of the size of this company, we opted for an automated credit management solution in order to be able to accept new customers and orders quickly. The objective was to give the Credit Manager the space and time to focus on the companies that require extra attention.
We started by incorporating the customer's credit acceptance policy into a decision tree. Then we added the data such as probability of bankruptcy, probability of default and credit limit. In this way the computer makes the decision that the Credit Manager would have made in most cases and sales can immediately proceed to close the deal. The deviating cases will automatically be presented to the Credit Manager for assessment or they will be rejected. With a manual review you retain the opportunity to mitigate the financial risks and request additional conditions or guarantees. With a rejection, sales does not have to spend additional time on this deal and can move on to more profitable businesses.
It is important to support your sales department with the insights they need so they have more time to close big deals.