The Impact Of Not Utilizing Credit Management Software
CREDIT MANAGEMENT SYSTEM
Without the proper use of credit management software, modern businesses are exposed to financial and operational risks of calamitous proportions. Any organization utilizing an order-to-cash system that does not comprehensively monitor and manage credit levels can potentially experience consequences to their creditworthiness, which can have long-term detrimental effect on capital availability and liquidity.
For those companies that are not employing credit management software, it is unwise to assume that customized manual procedures will have been sufficiently implemented to validate credit levels. Such shortfalls can create weaknesses in the organizations credit risk management process, leaving the company unable to detect early warning signs of financial distress and abnormalities in the customer base. The result can be unpaid invoices and significantly reduced cash flow, thus severely constraining business profitability.
As the Chief Financial Officer in charge of overseeing corporate credit management, being in complete control over credit risk assessment is essential. Leveraging automated credit management software provides the required visibility, accuracy, and speed to mitigate risk. The technology can rapidly detect any customer payment anomalies, including payment postponement due to potential financial distress, and ensure proactive action is taken, such as implementing more intensive follow-up and reducing credit limits.
The lack of comprehensive credit management platform can also impact an organizations ability to efficiently meet changing customer credit requirements, create long-term plan for inventory levels, and accurately model the costs of onboarding new customers. Aggregate customer and/or country risk can be magnified as credit policies and limits can remain unchanged during periods of economic downturn, increased regulations, and inflation. Compromised data from manual processes can critically damage decision-making, snowballing into potentially severe financial losses.
In todays digitalized economy, credit management software has become non-negotiable for finance executives. It has the capacity for streamlining processes, mitigating risk, minimizing the likelihood of unpaid invoices, and ensuring customer credit limits are accurate and reliable. Such cost-effective technological advancements are indispensable for the C-suite, who must take proactive stance in order to realize departmental path to success.
