Dec 14, 2015
By Shannon Abnal, Group Services Manager – Data Contribution & Industry Groups
Obtaining credit information upfront on customer applications is an integral part of credit management. Performing some due diligence in deciding a customer’s creditworthiness is part of every firm’s credit policy. There are varied methods of getting the info – pulling credit reports, checking references, internet research – but nobody doubts that knowing the facts about your potential customer before extending credit makes sense. You investigate, compile, consider, and determine before you extend credit.
The same holds true for what to do when debt goes bad. Most firms have a set of rules that guide the credit manager when customers pay slow or stop paying. Again, the methods might vary – in-house collection efforts, demand letters, using an external collection agency – but a great deal of thought and consideration goes into how to get paid.
But what about the middle of that chain? What can you do after you open an account to help encourage prompt payments? Is there a way to reward the customers that pay on time? And how can you warn other members of the credit community about the ones that don’t? Data contribution is a simple process that can strengthen your credit policy and answer these questions.
Data Contribution is the service that allows firms to report to the commercial credit bureaus how customers are paying. This is where tradelines on credit reports come from, how credit reports are formed. Firms who participate have the opportunity to create the reports credit managers rely on. And this simple concept can help your firm bridge that gap between “approved” and “written off.”
When you contribute and place a tradeline on the credit reports of your customers, you suddenly have the power to impact their credit history. Customers are much more likely to pay you when they know you have the ability to either improve or lower their credit score. Even if reporting doesn’t motivate the customer to pay, you can find some solace in limiting the customer’s ability to obtain credit elsewhere and in warning other creditors of the situation before the debtor can impact their bottom line as well. In addition, warning other creditors may actually help you get paid. This works for you two-fold: you help ensure that your customer can’t dig themselves any deeper in debt exhausting their ability to pay you and if they can’t secure credit elsewhere, they might just work harder to pay you and get back in to position to buy from you again.
Contributing data also opens up a variety of other products that can help the credit manager keep accounts in check, further strengthening that chain. Account monitoring, portfolio scoring, reference checking tools, monthly portfolio analysis reports… These are all tools that you gain access to. With the power of your data file, the credit bureaus can keep you abreast of changes in your customers’ credit. The services available vary, depending on the credit bureau you opt to share with, but you suddenly have access to tools that can help you manage your portfolio. Account monitoring, for example, can notify you when an account shows a decline in payment habits, has NSF checks, or gets sent to collections. Some services are free to low cost by the way. And they are not available if you don’t participate in data sharing.
Many folks become interested in data-sharing when they are upset with a particular customer that refuses to pay. They begin searching for a way to motivate the customer to pay and warn other creditors. The problem is that if you don’t already have a data sharing program in place, it’s generally too late. The customer has already skipped town or secured credit from your competitor down the street by the time you establish a data-sharing program. Instead, it makes a lot more sense to make data sharing part of your credit policy and regularly supply credit data to the credit bureaus.
Sharing your firm’s credit experience is generally a simple process. Most firms find it takes just a few minutes a month to participate. You extract and send an electronic file of aging and customer data to NACM once a month and we handle the rest of the process for you. A few minutes per month is all it takes to help manage your receivables and establish credit policy that makes sense – start to finish.
Shannon Abnal has more than 20 year of experience in the credit service industry. She joined NACM Oregon in November of 1997 and is now the Group Services Manager, overseeing the Data Contribution and Industry Groups programs. When not working, Shannon enjoys spending time with her family, shopping, and reading. She can often be found cheering her two daughters on at the soccer field.
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