Credit policies are like a plant grown from a seed. They need regular review and attention just like the plants in your garden to really bloom. A credit policy is simply a consistent guideline to follow when decisioning accounts, reviewing accounts, collecting and setting terms.
A couple of key items to consider in reviewing or establishing your policy:
- How many of your approvals have gone bad in the last six months? In the last year?
- What is your approval percentage?
- What is your decline percentage?
- What attributes of these bad accounts can predict future payment behavior?
Using the decisioning tools within BusinessIQ, I recently worked with a client to create an automated credit policy that consistently approves and declines prospects based on predictive credit attributes, application data and exception rules. The credit team now has more time to focus on the minority of cases that are deserving of a manual review.
Help your garden grow; a solid credit policy can help your company use its resources better – and reduce risk.