Really, it’s a little of both. To get a good sense of your client base’s behavioral payment patterns and be able to successfully manage credit risk, you first need to understand your portfolio. The best way to do that is to slice and dice your portfolio into different chunk-size segments and identify any trends within those segments.
A few segments you may want to consider analyzing are:
- Geographic location
- Size of business
- Years in business
Next, evaluate some of the key payment attributes within each segment, such as days beyond terms and associated aging data to determine positive and negative trends in your portfolio with which you can build upon or take action on. Once you’ve reviewed your portfolio with an analytical eye, you can start to develop a strong business plan to increase segment profitability, as well as minimize your credit risk.
Look for future posts from me, and let me know if there are any specific topics about managing your portfolio that you’d like to see.