June 2016 Article

Considerations When Automating the Credit Application Process

by Kathleen Dasal

Today's competitive market demands that businesses operate quickly and on reduced budgets. This forces them to seek out and implement innovative ways to do more with less. For credit and collections departments it means implementing a more effective operating model that is not dependent on increasing manpower but results in better policies, fewer human processes and errors, and ultimately lower costs. To accomplish these objectives, credit departments are moving toward process automation in many areas with the credit application process being of top consideration.

Credit Today's recent benchmarking survey on process automation states "Huge opportunity remains for credit organizations to Improve Performance through automation." According to that Benchmark Study, released in May 2016, automation of the credit application process was the single highest priority area for credit departments to focus on in 2016. (See also: Survey: Top Automation Priorities for Credit Departments in 2016.)

Mike Mitchell, President and CEO of Burbank, CA-based Credit Management Association (CMA), agrees that automation is the key to improving best practices in credit departments. In fact, CMA's 2016 CreditScape Spring Summit theme was "The Efficient Digital Credit Department." The summit focused on automating processes and how to stay current on best digital credit practices. Top credit managers and senior executives shared the benefits that resulted from automating the customer onboarding process and creating a digital credit file system.

The Benefits

An automating initiative is a major undertaking which begins with a clear understanding of the benefits. The following is an overview of how the online credit application process works, the key benefits and considerations for those planning to automate the credit application process in 2016.

Businesses choose to focus on automating the online credit application process because of the many tangible benefits it offers, beginning with reducing the time to process from several days to hours. This streamlined process delivers greater efficiencies, allowing staff to perform more credit reviews and focus more attention on higher risk accounts.

One of the major benefits of using an online credit application is the significant reduction in the number of incomplete applications.

Many online credit applications are created and hosted by a third party provider. Your customers are directed to a secure link where they complete your credit application electronically. Typically, an online credit application system requires customers to provide all required information in order to submit their credit application. One of the major benefits of using an online credit application is the significant reduction in the number of incomplete applications received, thereby reducing phone calls back and forth to chase missing information. It also eliminates steps such as copying, printing, and faxing, which translates into time savings and efficiency as well.

Easy-To-Access Repository of Customer Data

Online credit applications are stored in a queue where authorized credit, sales and management personnel can easily monitor the status of all applications to minimize inter-department communication errors or delays. An online credit application portal can store all due diligence information in one place, including information such as purchasing contact information, billing contact information, resale certificates, tax certificates, W-9, business license, references and financials. Converting from a manual credit application process to an online credit application is increasingly an industry best practice as it allows you to have a single, centralized source for all credit data to be safely and securely stored.

In addition, most third party providers integrate with external data sources such as business credit reporting agencies. With this automation, decision analytics are easily incorporated to develop credit scorecards. The application credit score is an automated decision tool based on your company's auto approval rules and settings. By deploying a credit scorecard, credit approvals are not only streamlined, but consistently rated as well. You can be confident that consistent rules are being applied to every submitted application. Credit scoring was ranked as another top priority Credit Today's recent benchmarking study and can be accomplished hand-in-hand with an online credit application initiative.

Automating Letters

Once a completed application is submitted and scored, with an "approved" status an order can be put into production. If an application is "pending" or "denied" the credit staff can review for further analysis. The system can also send automated approval or denial letters further expediting the process and saving staff time.

Credit is not the only department which benefits from a conversion to an online credit application. When departments within an organization are not properly connected, the result is generally redundancy and inefficiency. But with automation, information is disseminated to all interrelated departments immediately. Valuable time is saved chasing down missing documents and walking paperwork from one department to another. Sales can track an application from submission to setup thus reducing the number of calls to credit asking for updates. Sales teams keep business moving ahead when decisions come back in hours as opposed to days. And the sooner you get a new customer approved, the sooner you take your prospect off the market and close the sale. Management can also easily view application statistics for either a quick overview or an in-depth analysis. Senior management can see that improved efficiency allows additional work to be performed by existing staff.

Efficient and "Green"

Automation supports eco-friendly corporate initiatives by dramatically reducing waste associated with printing and faxing. The electronic storage of documents reduces the floor space required for filing cabinets and makes retrieval of documents much easier. By utilizing technology rather than traditional manual paper processes, companies can simultaneously show significant progress in both environmental responsibility and cost savings.

Customers benefit from this automation as well. The customer can start and stop the application process according to their schedule and they can upload rather than hassle with printing and faxing multiple documents. They are notified quickly of their approval and status which also contributes to an overall improved customer experience.

What to Look For

Once you've made the decision to automate your credit application, be sure the correct steps are taken to ensure a successful path. As mentioned, most companies contract with a third party provider to create and host a private-branded online credit application. Functionality will vary from provider to provider, so start by thoroughly researching third-party providers. Be certain to ask about the following critical features up-front to ensure there are no surprises:

  • What is the timeline for implementation?
  • What key factors would cause implementation to take longer?
  • Is the product a fixed application template, or does it allow for customization to meet your department's specific requirements?
  • If customization is available, what is the process and timeframe for modifications?

A brief consultation with your attorney is also encouraged to gain practical legal context for the use of digital credit applications, including terms and conditions, enforceability, information security, electronic signatures and other legal considerations when using a paperless process.

Ultimately you want to partner with an online credit application provider who has a thorough understanding of your business processes. The more they are willing to learn about your company's business processes, the better they'll be able to accurately replicate these processes in your online application. Strong communication and awareness reduces oversights which can be very costly and time consuming.

All in all, implementation of an online credit application will keep business moving ahead with more purposeful work and greater consistency. Quicker processing of credit applications allows for more business to take place in a data-driven economy that demands efficiency to succeed. ■

Kathleen Dasal is CEO of Ansonia Credit Data, the next generation business credit reporting service. After 25 years in business credit, Kathleen co-founded Ansonia in 2009. Ansonia has over $2 trillion in unique trade A/R data on over 7 million businesses in over 100 countries across 97 industries.

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