Make Informed Decisions To Avert Bad Debt

Credit management is the process businesses use to assess and control the credit they extend to customers. This process involves setting credit limits, monitoring customer payment behavior, managing overdue accounts, and deciding when to approve or restrict further sales on credit. 

The overarching goal is to minimize the risk of bad debt through unpaid invoices while keeping customer relationships healthy and cash flow steady.

In the end, it’s all about balancing risk and revenue by making sure customers can pay what they owe on time without hurting the business financially.

The best way to automate customer credit limit reviews is to build a proactive, risk-based system that continuously evaluates customer financial health using real-time data, scoring models, and predictive triggers, not just static rules or scheduled reviews.

Here’s how to design a credit management system with the help of Fazeshift’s credit agent:

• Real-Time Risk Monitoring Engine: Pull real-time data from your ERP or CRM, such as outstanding balances and your aging schedule, and internal payment behavior, such as DSO and past dues.
• Dynamic Threshold-Based Triggers: Set automation rules to trigger credit limit review if a customer’s risk score worsens, their outstanding balance exceeds 80 percent of their limit, or they have multiple invoices that are more than 15 days overdue.
• Auto-Flag Accounts and Route Tasks: When a credit limit review is triggered, set up automation to create a credit review task if your collections or risk team’s queue. Include a customer’s current limit, outstanding accounts receivable balance, risk score history, and payment behavior details. You can even automatically send a real-time notification via email or internal communication tools to alert an account manager.
• Automated Credit Review Recommendations: Based on its analysis, our AI agent can recommend limit increases if payment behaviors are strong, credit freezes if there are multiple overdue invoices, and lower limits if their DSO is rising or their risk score drops. You can also opt to route high-risk cases for further review.
• Automatically Notify Sales And Collections: If a credit change is made, notifications can go out to your sales team to pause new orders and to your collections team to escalate communications or start the dunning process.

As a general best practice, you should maintain change logs for credit limits for compliance purposes, redact personal data from any report to minimize the risk of inadvertently sharing personally identifiable information, and automate customer consent for credit checks, if local regulations require it.