A company's success and growth are deeply influenced by the financial stability and creditworthiness of its customers. However, after initial credit checks and onboarding, many companies overlook ongoing monitoring of their customers' financial health. This oversight can limit their ability to make informed business decisions, especially when it comes to nurturing and expanding customer relationships.
“Giving yourself the right opportunities for additional growth and positive exposures requires insights,” says Avia Yudalevich, CFO and Head of Supply Chain at Intrinsic Brands. “If you’re not harnessing financial health insights, you're going to get behind, and your business may not be able to sustain itself long term.”
The consequences of neglecting customers’ and prospects’ financial health insights can start much sooner than companies may realize. Considering how limited companies’ credit checks tend to be, even their initial approaches to extending credit often leave money on the table.
Maximizing New and Existing Opportunities with Accurate Data
Assessing prospects’ financial health based on highly accurate, robust, and up-to-date information, and staying informed on customers’ financial health over time, empowers CFOs to make smarter, growth-driving decisions. These range from writing more business with creditworthy customers to minimizing the impact of non-payment and slow-payment issues—or preventing them altogether.
Over the last fifteen to twenty years, the ways B2B companies do business have evolved significantly. Sales and marketing, for example, are now much more reliant on diverse data sources and driven by data-driven strategies.
The ways companies examine potential sales opportunities haven’t advanced quite as much, however.
“Most companies manage credit today the same way they did fifty years ago,” says Lee Fahrenz, Sales Vice President at Allianz Trade in North America. “They still get a credit application [from prospects] and maybe two or three trade references — and those could be friends or relatives, for all the companies know. They might check bank references and credit or mercantile agency reports, too, but even when taken all together those resources provide a very limited picture of the financial health of a company.”
By consulting more accurate and extensive data on prospects, companies can manage their businesses in new ways — and unlock more revenue as a result.
Leveraging Trade Credit Insurance for Sustained Growth
When companies can access reliable data on their prospects’ ability to pay, they can make more informed decisions when establishing new business relationships. New or prospective buyers often request more credit than a supplier may feel comfortable extending, based on traditional information sources like Dun & Bradstreet D-U-N-S numbers and customer-supplied references. In such cases, accessing more robust financial health insights can give suppliers the confidence to capture more business.
Purchasing trade credit insurance equips companies with these critical insights. An insurer like Allianz Trade in North America, for example, monitors the finances of 83 million businesses around the world, and provides clients access to financial data that support more informed, impactful, revenue-driving decision making.
“A non-client of Allianz Trade in North America mentioned to me recently that he’d had a new recurring customer place a $300,000 order for chemicals, but his team had only felt comfortable giving the customer $100,000,” says Fahrenz. “Meanwhile our database at the time showed that this particular customer of theirs was insured with fifteen other policyholders of ours, and we’d just approved the customer for a $1.1 million credit limit on one of those policies.”
Had the chemicals-industry company consulted Allianz Trade in North America’s database before closing the sale, they could have achieved the kind of impactful revenue results that can pay for a policy many times over. (If the company commanded a 20% gross margin and the customer made six chemicals orders per year, for example, the additional credit would drive an additional $1.2 million of top-line revenue for the company annually.)
Growing the Right Relationships
Consulting Allianz Trade in North America’s financial health insights also helps companies to avoid working with customers who are unlikely to pay them and maintain their cash flow in the event that occurs — as trade credit insurance may help replace covered losses through bad debt.
Ensuring customers continue to pay throughout the course of their business relationships is just as important as getting their credit decisions right up front. That’s why Allianz Trade in North America offers clients ongoing monitoring on their customers’ financial situations and credit risks.
“If we receive a claim or notification indicating that one of our policyholders is experiencing delayed payments from a client, we can alert our other policyholders that this client may be facing cash flow challenges and could struggle to make timely payments in the near future,” says Fahrenz.
If customers consistently demonstrate their ability to pay, that’s valuable information as well. When companies want to grow their existing business relationships by offering existing customers larger contracts or access to new products, robust financial health insights can give them the confidence to act on more opportunities to do that — rather than maintain a conservative posture out of concern customers can’t keep up.
Acting on more growth-driving opportunities, based on how customers are doing, can help companies grow safely and sustainably. Having the right information, partner, and protections is key.
Allianz Trade in North America, the world leader in trade credit insurance, has 62,000+ clients worldwide. To learn how Allianz Trade in North America can help you protect your cash flow and grow with confidence, go to https://www.allianz-trade.com/en_US.html.
