As an experienced credit manager, you probably know the criteria you use to extend a line of credit like the back of your hand. Your decisions are probably based on deep experience and a highly tuned intuition that you’ve earned over the years.
But, despite all your experience, there’s more to it in today’s enterprise. Credit management is getting more complicated, and business decisions are not just made on gut feelings anymore. Instead, data-based decision-making has become the essential best practice that governs nearly every part of business.
So what is data-based decision-making?
Today, sophisticated data warehouse and business intelligence systems allow us to collect, filter, and analyze vast amounts of data to aid in making smarter business decisions.
And, with the reduced cost and wide availability of cloud-based storage systems and purpose-built software, business intelligence is no longer available only to huge enterprises. Any business of any size can benefit from using the data that’s available to it. One study from the MIT Center for Digital Business found that “organizations driven most by data-based decision making had 4% higher productivity rates and 6% higher profits.” Other researchers have replicated these same findings, confirming that data-based decision-making can have huge benefits for the bottom line.
Bringing data to credit decisions
Business intelligence and data-based decision-making have revolutionized the way many companies approach decisions, including in the credit management industry. With accurate, current information about commercial customers, credit managers can now make informed decisions that will benefit their companies — and their customers.
Where does the data come from? In credit management, many different sources of data can be valuable in your credit determination process. Data from within your own records can be used to determine a customer’s track record, payment history, and the like.
However, data from outside sources can offer a more objective perspective and deliver insights that your company’s direct experience can’t. Commercial credit reports today go beyond just giving you a credit score, offering a deeper profile of a potential customer’s track record elsewhere.
And credit managers can get even more benefits when they are actively engaged with the greater credit community.
- Through data contribution programs, credit professionals contribute information about their accounts receivable and data with others in the industry. Credit reporting agencies such as Experian and Equifax maintain strict confidentiality standards for this information, limiting access, verifying the integrity of new information, and securing its privacy.
- On a local level, industry credit groups provide a current and personalized perspective on credit accounts that can enable credit managers to make more individualized decisions. These groups also share best practices and provide professional support.
Today, we are able to access a dizzying amount of data. The key is being able to use that data effectively. Through business intelligence dashboards and apps, you can analyze the credit and payment history of nearly any commercial customer. But more important, your business will have the tools to make sound, long-term decisions.