Automated credit reports are, and have been, the future of credit management solutions. However what happens when certain areas cannot facilitate such solutions? Are their traditional methods of credit management simply cumbersome?

The Middle East and North Africa (MENA) region has traditionally been ‘off the mark’ in terms of automated credit processes. Nonetheless, recent transformations of the business industry in MENA has seen great strides toward a more efficient conduction of business, coming more ‘in line’ with the rest of the world. Companies such as Cedar Rose have been helping to bring the MENA region level on an international scale, in terms of automating processes. Although, is a fully automated system a step forward?

Room for Improvement
There are certain trends that demonstrate the possibility that B2B practice can transform, ultimately leading to a fully automated credit management system in the MENA region.

  • Customer Expectations: First and foremost, customer expectations over the last decade have grown in demand for greater online and mobile experiences. Further supported by the fact that “mobile payments are expected to grow four times by 2020” (Bahillo, 2016). Internally, users of credit and risk reports have adopted heightened expectations for timeliness and quality, thus conjuring a desire for an alteration in the current credit management model.
  • FinancialTechnology Companies Increasing Pressure: Post tighter regulatory controls through regulations such as AML and KYC, the digitally savvy companies are ‘upping the ante’ on transformations on the antiquated model of credit management. Furthermore, in order to stay competitive, staying current on the latest trends is a must.

These examples provide reasonable motives to suggest that credit management can be fully automated, yet there is still the principal question of should it be.

The Problems

  • Inefficiency: Efficiency is one of the underlying factors that pave the way forward for a revolutionary automated system. Society is quick, fast-paced and, most importantly, online. So why are we dealing with paper invoices and files that do nothing but collect dust? A crucial component of credit management is processing credit-blocked sales. Practically, a customer places an order; the supplier must then check the customer’s credit exposure against the assigned credit limit. Additionally, if problems then arise, the blocked sales order will be manually reviewed then forwarded for further processing.

This process creates extensive deliberation between credit managers and sales, thus fashioning an elongated road of miscommunication and inefficiencies.

  • Trust Concept: Suppliers must develop a knack for trusting customers in terms of financial issues. For obvious reasons, this is not upholding, therefore, suppliers must investigate the trading partner before entering an arrangement. A collection of information from internal and external sources to determine creditworthiness generates another time-consuming path for credit management. Aggregating data in-time is a desire for efficient business, yet, the antiquated model doesn’t allow for such determination. Credit managers are simply unable to make informed decisions without the aforementioned process.
  • Meagre Risk Modelling: Risk modelling strategies are a common feature of credit management. Factors, such as determining how much credit to extend to a customer, produce an array of complications when using the antiquated model. Businesses calculate exposure in order to determine an agreed upon sum of credit. This is, traditionally, formulated by a customer’s payment history, internal data and external information. Yet, the current credit management approach cannot generate complex, significant risk measures to provide a summary of exposure. Moreover, these tactics are rigid and cannot be adjusted thus requiring duplication in effort. Also, the burden of manually gathering data required for the model each day is cumbersome.

Despite the aforementioned problems with the traditional credit management processes, there are, in specific cases, benefits of the system. For example, in areas where data is not available online, or even, if the data is deemed too outdated, it may be best to use the traditional processing system. Manual credit reporting in the MENA region or even due diligence investigations would be highly recommended and sought out when official data is unreliable or unavailable. Yet, when these factors are not the case, what are the advantages of the fully automated systems?

The Solutions

  • Saving Time & Money: An automated credit management system allows staff to focus on other areas that can speed up the process, with the burden of manually inputting data being lifted. An automated review of credit limit applications to calculate credit limit and risk category will save vital amounts of time and money spent on resources. This new and improved system can also detect negative credit trends and form a portfolio over customers, determining ones that need to be blocked, put on hold or simply, have terms adjusted. This, therefore, saves time and money chasing up customers and ‘tip-toeing’ around communication channels.
  • Mitigate Risk: If credit management was to be fully automated, it would mitigate potential risk and increase the efficiency of business arrangements. Through automation, it is possible to calculate the credit management parameters – such as credit limit. Using scoring systems to assess how much credit should be extended; new technologies reduce guesswork and the manual processing of making credit decisions – which, overall, mitigates risk. This scoring system allows for a more fluid management of credit reports and business information.
  • Improved Customer Service: An automated service accelerates the processing of credit-blocked sales orders. The aggregate of information needed to assess these details is quick and efficient allowing for faster decision-decision making, resulting in better customer service. A new credit management solution could also provide transparency in the case of credit-blocked sales, with the information online and reviewable, suppliers can provide fast and detailed explanations to customers.

Cedar Rose offer solutions for areas that traditionally haven’t had the progressiveness enjoyed by more developed economies.

The Cedar Rose Option

Cedar Rose reports include a visual CR Score for your company’s needs, to mitigate risks and provide an informed, detailed and comprehensive risk assessment, viewable in 1 second. The advanced AI technology adopted by Cedar Rose can help you make swift assessments for future investments. Not only is it informative, but it is responsive. Via API, you can gain 24/7 access without email or time delays, this visual tool can be added to your next report for enhanced elucidation. Operating in the MENA region, where information is scarce, as well as 150 other countries around the globe, Cedar Rose can simplify what would be, time-consuming business transactions and investigations.

Source: Cedar Rose Press Release