Customer onboarding is arguably the most important part of a business transaction because businesses can enhance revenue and cultivate enduring customer relationships. However, the time-consuming onboarding process, coupled with the urgency for swift credit decisions due to sales or competitive pressures, can escalate loss risk.
Why it matters: Understanding and improving customer onboarding is crucial because it not only influences the company’s revenue but also shapes long-term customer relationships.
A seamless and comprehensive onboarding process accelerates time-to-value, maximizes product adoption and reduces customer churn, thus leading to many positive outcomes.
By the numbers: According to a recent eNews poll, most credit professionals said it takes them one to three days to approve new customers (41%).
- While others said it takes them 24 hours or less (29%) to do so.
- Fewer said it takes them one week or more (16%).
The timeline to accept and onboard a customer depends on a variety of factors.
Missing or insufficient customer information, such as contact information, financials or references, can slow the onboarding process. Incomplete data hinders credit professionals from accurately assessing risks.
“Applicants with limited business report information, no personal guarantee and delayed responses from trade references will delay my credit decision,” said Laura Castillo, CBA, territory credit manager at Crawford Electric Supply Company, Inc. (San Antonio, TX). “For qualified applicants, we use business credit reports, trade reports and trade references from our local and national groups to process applications quickly.”
Shane Stewart, credit assistant at NEBCO, Inc. (Lincoln, NE), said his department takes one-to-three days to accept a new customer. “If I don’t have enough information, I will request credit reports,” he said. “If we require a personal guarantee, we’ll use credit information systems for a three-part credit report. The company owner signing our application must personally guarantee it. We also need the owner’s Social Security number, which may extend the approval process.”
Risk tolerance refers to an organization’s willingness and ability to endure or accept uncertainty or potential losses in pursuit of its financial goals. Assessing the level of risk is essential for credit professionals to make sound lending decisions.
The riskier the customer is, the more research needed to approve an account. “This typically happens with large credit requests over $100,000 or riskier product lines due to contract complexities,” said Alaina Worden, CCE, credit and collections manager at CECO, Inc. (Portland, OR), whose department takes three-to-five days to onboard new customers. “The CFO and owner’s approval of credit department recommendations highlights our dedication to risk assessment and informed decision-making in line with company policy and values.”
Yes but: Pressure from sales or the competitive marketplace can cause credit professionals to overlook potential risks to make the sale. “Sales has to send the account to us before we even agree to open them,” said Anna Puryear, CCE, credit manager at Kontoor Brands, Inc. (Greensboro, NC). “They have to vet the customer, make sure that they’re in an area that they want to open and visit them to make sure they have a decent looking store. Our tax department and our master data team have to look into the customer, too.”
Company Size and Customer Volume
The speed of customer onboarding often hinges on company size and customer volume. “Although I’ve been in credit for a long time, it takes time to research and review the data as well as make sure that the credit application is filled out properly with the correct signatures,” said Dawn Collar, CBF, credit manager at Southern Plumbing & Heating Supply Corp. (Gloucester, VA). “I usually give my customers up to three days depending on the information that comes back. This way, I can be prepared for any challenges or surprises. It also allows extra time to address potential application issues or missing data.”
Collaboration with Other Departments
Customer onboarding may involve a lengthy approval process with multiple departments, potentially causing delays due to thorough application reviews. Sherry Bushman, director of credit and collections at Partners Personnel (Santa Barbara, CA), waits for approval from sales and legal teams before she officially approves and activates an account. “Risk management verifies if a job description is on our insurance’s prohibitive list due to high claim levels or policy mismatch,” she said. “If we can mitigate the risk, we proceed with the client. But on average, the process takes 24 hours or less.”
For Puryear, it takes the tax team a couple days as they have to call the state and verify tax exemptions. “That in combination with the credit review of the account, it can take between one to three days to approve a customer,” she explained.
Streamline the Onboarding Process
Educational resources will keep you informed on the latest trends and grow your credit knowledge. This can also lead you to make better credit decisions. “NACM credit reports and member relationships are my most efficient tools,” said Collar. “If there’s questionable information, I can discuss it with another member for a clearer picture.”
Streamline customer onboarding by reducing paperwork, using digital tools and automating tasks. This makes it simpler for customers to begin using your products and services. “We’re trying to develop a program that is consistent and helps us to improve efficiency in our workflows, but we will still use the human aspect of credit decisioning,” Worden said.
The bottom line: Effective customer onboarding boosts revenue and nurtures lasting relationships, but it demands risk control and data collection. Digitizing and automating this process, along with cross-departmental cooperation, can speed up approvals while ensuring solid credit decisions.
