Core Insights Blog

Five Tips for Monitoring Your Customer Base

September 7th, 2010 by Alex Coté

Monitor, monitor, monitor. I hear those words over and over again when it comes to the art and science of credit management. As we’ve experienced over the last few years, things can change pretty quickly and take down what were once stable customers in the process. Industry vets will say it comes down to watching every movement, every trend and every inflection in the voice of that slow payer on the phone if you are going to sniff out a potential problem before it’s too late. Even if you’ve done a great job in vetting your customers through your credit process, today’s new customer could be tomorrow’s deadbeat. It is true that great detective work will go a long way in protecting the financial interests of your company, but that’s impossible to scale given the size of the typical credit department (if you are lucky enough to have one).

Here are 5 tips on how to get the most out of your monitoring efforts:

1. Watch key metrics. It’s easy to say “let’s monitor our customers,” and then go off devising a complex plan full of intricate triggers, rules and metrics pulled together from internal and external sources. For most businesses it makes sense to watch a core group of items such as public records (like liens, judgments, and bankruptcies) and credit score changes. Start simple and measure your results. You can always get more complicated, but don’t risk having users tune out, by making it overly complex.
2. Monitor all of your customers. I know this sounds expensive or time consuming, but the cost of catching a single write-off often will pay for whatever process or service you put in place. It is best to start with customers that have active credit balances in the last 12 months.
3. Publish a daily report to the team. Try to consolidate your alerts into a single report to review each morning with your team, that way you can assign owners for each item. Alerts that are triggered “as it happens” intuitively makes sense, but in reality you’ll likely be away from your desk and end up reviewing alerts on your Blackberry or iPhone. It’s easy to forget to come back to that alert you received 10 minutes into an hour long meeting. Stick with a 15 minute review of a single document each morning, rather than trying to piece together all the emails you received throughout the prior day.
4. Assign an owner to follow-up on each alert.It’s just as important to be aware of a potential problem as it is to follow-up. Again, stick to a process. Review each alert, assign them and then close them out so nothing slips through. An alert triggered by a news story about significant layoffs at a key customer could be a clue as to future payment problems or just normal business cost cutting. Either way it is best to bring the alert full circle and determine next steps if any.
5. Get the big picture and share with upper management. It’s important to step back every month and review the customer portfolio overall. What are your top credit balance accounts? Your riskiest accounts? Overall aging this month versus last? The idea is to present a proactive approach to management to show you are on top of your customer portfolio and not likely to be surprised.

Have a tip or process for monitoring your customers? Comment below to share them with the community.

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