B2B Customer Onboarding: Credit Applications and Assessments Ultimate Guide
Onboarding potential new customers is a necessary process for B2B businesses. However, it’s important to balance the sales opportunity with the risk of non-payment. In this guide we cover the trade credit onboarding process, from credit application to assessment and decision. Learn automation best practices and how technology can enhance the onboarding process.
TLDR Summary:
Managing credit applications, assessments and decisions can be time-consuming, but automation can assist. An automated, efficient process is beneficial for customers and internal stakeholders alike.
The Trade Credit Application Form Explained
Everything you need to know about a trade credit application form.
What is a trade credit application?
A trade credit application is completed by an applicant business seeking to trade with another business/supplier under credit terms. Options include using a Word document, PDF, email or an online application form.
Why use a trade credit application?
A trade credit application form creates a consistent process that ensures you get the information you need to complete a credit assessment, make a decision, set up the account in your system and supply them.
The sections to include for a great business credit application
Typically a thorough application form will include the following sections. Each business and their information requirements is different, which is why our onboarding software has customisable questions and sections so you’re only asking your customers for information you truly need.
- ABN and Business Name
- Contact Information
- Business Address
- Business Ownership
- Trade References
- Terms and Conditions
- Acceptance and Signing
- Documents like director guarantees
The benefits of a digital trade credit application
A digital trade application is a form completed by the applicant online, eliminating the need for paper, PDFs or emails. It enables businesses to control the customer approval and onboarding process. Benefits include a fast and efficient process, improved risk assessment, integration with other systems (e.g. CRM, PPSR, Monitoring) and an enhanced customer experience.
Credit Assessment Techniques To Manage Credit Risk
Once the application has been submitted, the potential customer needs to be assessed for creditworthinesss. This process can be done manually or automated through software like Access Intell. It’s important to gather information from as many sources as possible to ensure you have the full risk picture before making a decision.
What factors should be considered in the credit assessment phase?
So, how is creditworthiness determined? In its simplest form, it involves evaluating a range of factors, all aimed at gauging a borrower’s financial health and behaviour. These creditworthiness factors are often referred to as the five Cs of credit:
- Character
- Capacity
- Capital
- Collateral
- Conditions
By considering all five Cs, creditors can get a better understanding of the customer’s risk and make a more informed decision. The importance of each ‘C’ during assessment will vary depending on the business.
The information Access Intell uses to assess applications
Our software aggregates data from multiple sources and categorises your customers into our proprietary risk buckets to determine the probability of non-payment (payment risk score) and the likelihood of failure (insolvency risk score). Some of the specific information the Access Intell software uses for assessment includes:
- Trusted Credit Bureau Scores
- Business license validity and status e.g. Construction license, Liquor license
- Industry
- Length of time a business has been trading
- Where they are located
- Payment patterns
- Court actions
- Defaults (including ATO Business Tax Default information)
- Registered PPSR security
- Director standing and sentiment
- And many other important indicators
We also provide the detail on where the information came from to give assurance of its credibility.
Using a credit decisioning model
A credit decisioning model takes the question ‘do we wish to approve this customer for a trade credit account?’ and formulates an answer by aggregating large amounts of information and applying multiple rules using predefined parameters. The model output may be ‘yes – open the account’, ‘no- do not open the account’ or ‘refer for further investigation’. The model may also be set to recommend a credit limit, approve an increase or set a review date. Incorporating change into credit decisioning models in real time is the key to optimising business performance and avoiding failing customers and those least likely to pay within terms.
How to automate the creditworthiness assessment of customers
Manual creditworthiness checks can be time consuming. It’s still possible to automate credit assessments, even while using a paper-based credit application form. The Access Intell software can be used as a standalone credit assessment tool, by simply entering an ABN to instantly receive all the information you need to make a decision. This allows you to:
- Validate the entity
- Receive an instant insolvency risk score and adverse alerts (at time of creation)
- Generate additional credit reports as needed
- Make a decision to approve, refer, recommend or decline
Credit Decision Making (And How To Automate It)
Upon completing the credit assessment, a decision needs to be made. Do you extend credit to the potential customer, and if so, how much? It is very much an individual business decision having regard to the industry, tenure, competitors, exposure risk amount and the benefit to the business.
Automated credit decisioning
Access Intell’s automated approval workflows to approve/reject/recommend/refer save time and enable sales success. We can also customise your approval workflows based on your business’s risk profile. This balances the sales opportunity against the risk of non-payment.
Setting a trade credit limit
Setting customer credit limits depends on numerous factors including your industry, length of trading relationship, and size of customer. Experienced businesses tend to begin with cash only accounts and only extend or increase credit limits once they are comfortable with the customer’s performance. Monitoring can help track all customers creditworthiness to give assurance that accounts will be settled when due.
Notifying your customer of the decision
Once a decision has been made, it’s important to notify the customer of the outcome. The Access Intell decision workflow does this automatically. The account can then be set up in your CRM or ERP system, ready for their first sales order. Consider integrating your application process with your CRM or ERP system to automatically create the record with all the required information.
Ongoing credit monitoring of trade customers
It’s important not to stop here. Regular credit limit reviews ensure the balance of sales and risk remains in place. Consider also continuously monitoring the customer for new signs of risk such as court actions, ATO business tax defaults and the like.
Benefits of an automated credit application and decisioning workflow
Creating an automated credit application, assessment and decision workflow offers a host of benefits for both your business and your customers. It creates an easy, automated experience for your customers. It maximises the efficiency of your internal finance team through an accurate, efficient process. Plus it standardises the assessment and decision making process to ensure your business minimises potential financial loss while maximising sales growth.
How online credit application software benefits salespeople
Online credit application software can help improve internal relationships between credit and sales. It gives sales teams visibility over the progress of applications and an understanding of the process to better understand credit decisions. It also starts the new customer relationship on the right foot by creating a smooth, fast experience.
How technology is transforming the onboarding process
Innovation is having a real impact on productivity for customer onboarding processes. Many businesses are turning to a modular approach to introduce technology improvements such as identifying customers, eSignatures and integrating with CRM systems.
ROI of automated credit application and decision software
Automated credit application and decision software like Access Intell’s provides significant ROI benefits, including productivity savings and a reduction in bad debts due to enhanced credit risk assessment. Check out our Onboarding ROI Calculator to discover the ROI for your business.
How Access Intell Can Help Automate Your Onboarding Process
The Access Intell online trade credit application and assessment product is customisable to your unique processes, information requirements, delivery method and business risk profile. Balance the sales opportunity with the danger of loss using our instantaneous risk profile summary upon submission, decisioning workflows, and eSign capabilities. You can also use the software as a standalone decisioning tool, by simply inserting an ABN to get a decision.
Tour our interactive demo to learn more:
Online Application Speeds Up Customer Onboarding From Days To Hours
Learn how ABC Building Products uses the Access Intell application and decisioning software to onboard new customers, fast.
A trade reference on a credit application is a reference providing feedback on that applicant’s credit and payment history. Typically, the applicant will provide the referrer’s business name and contact details, along with trading terms and how long they’ve traded together. The business undertaking the credit assessment will then request from that reference information on whether the business paid within trading terms and their general relationship and payment reliability. Trade references are just one piece of information out of many that should be considered during a credit assessment.
Commonly offered B2B trading terms include cash on delivery (COD), 7 days, 30 days, 45 days or 60 days. These can be offered under NET or EOM terms e.g. a 30-day NET account requires payment 30 days from invoice date whereas a 30-day EOM account means payment is due 30 days after the end of the month in which the invoice was dated. Often businesses will offer different terms to different customers, based on the size of the business, their purchases and their risk profile.
Setting customer credit limits depends on numerous factors including your industry, length of trading relationship and size of customer. One approach is to begin with cash only accounts and only extend or increase credit limits once comfortable with the customer’s payment reliability. Some industries have common, expected terms e.g. hospitality is typically 7 day terms whereas in manufacturing 30 day terms are more common.
Not all credit reports are equal. Different credit bureaus have different strengths and information sources, which will better suit some businesses and industries better than others. Additionally, each credit bureau offers a range of different reports. A standard verification credit report may suit a low risk applicant whereas an in-depth investigation report may suit a higher risk applicant or one asking for a higher credit limit. An ideal approach is to use multiple credit bureaus, selecting the best bureau and type of report for your needs to ensure you have the full risk picture on that applicant.
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