Credit Risk Management Is Vital For Your Firm

There is certainly hope that the UK economy is turning upwards

, but many firms are still experiencing difficulties in obtaining money from customers and maintaining their cash flow. There is no doubt that firms and consumers across the entire nation have been affected by the 'Credit Crunch', but for a firm reliant on these funds coming in, offering credit to the wrong type of customer can be very dangerous. In fact, it may even put them out of business, as has been witnessed in many industries of late. Therefore, undertaking some form of credit risk management should be a top priority for all firms who operate in this manner. Undertaking this risk assessment may incur a cost but if it prevents your firm from dealing with a bad credit risk, the benefits will be vast.

You may think that credit risk management is something that only the major firms needs to carry out but this would be a dangerous mindset to develop. Every firm that is reliant on customers paying them on a credit basis needs to know whether they are likely to be paid or not. If you a small firm, every payment is likely to be vital and missing out on any could lead to serious consequences. For a minimal outlay, a proper financial credit check can be carried out on any potential customer allowing your firm to determine if they are good for the future of your business.

When carrying out a credit risk management check, the first step should be to obtain the company reports. Information such as credit scores, turnover and specific details about a company should provide a starting point for any analysis. It may also be that information received in a director report about the people listed as directors within the company could be very illuminating with regards their ability to pay.

One very important piece of information may be if the company has received any CCJ's (County Court Judgments) in recent years and this sort of detail is available for limited and non-limited companies. This should ensure that regardless of the type of company you are working with, this information should be readily available. Undertaking credit risk management is not something that you can overlook and hope for the best, failure to carry out this information, when it is readily available, could be very damaging. Overlooking this information would place your own company at a grater degree of risk than would be necessary.

It may well be that you do not have a lot of time to undertake the analysis of any potential new customer, but the turnaround time for the credit risk management is not overly long. It certain circumstances, the turn around time can be achieved in only three days, making it ideal for companies that need to make a quick response. The other great benefit alongside the speedy return is the accuracy level, stated to be over the 99% rating. Given that firm has to rely on the information obtained, having this level of accuracy is massively important as it could make the difference between the success and failure of the company.

by: Dennis Scott

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