What smart credit teams know about balancing speed and risk

Assessing a customer’s creditworthiness and deciding on a credit line that protects your company from risk without hindering profits is no easy task. When a salesperson is asking for a credit manager to complete their credit investigation quickly so they can close the sale, it is important that credit managers find a balance between speed and risk. 

Why it matters: Whether they’re eager to close a large sale or trying to accommodate a customer on a tight timeline, salespeople may want the credit department to make a fast credit decision for a host of reasons. While it can be difficult to work under stress, credit managers will remain faithful to their credit standards no matter the circumstances. 

Working on a tight deadline is pretty common for Tracy Mitchell, CBA, CCRA, director of accounts receivable for Trinity Logistics (Seaford, DE), and she’s established a process for screening credit requests quickly.  

“We have a special box called ‘Hot Credit’ with a one-hour turnaround time,” Mitchell said. “But just because someone sends over a request does not mean they’re going to get the credit line they are requesting; it means that they will get a preliminary answer within an hour.”  

When asked to make a prompt decision on a credit line, credit managers may sometimes bend their traditional investigation process to help them determine a preliminary line of credit, with many looking for proof of an established credit history at a minimum.  

“I try to gather information as quickly as I can,” said Krystal Daugherty, CCE, director of order to cash for Acuren Inspection (Seabrook, TX). “Pulling a business credit report is the quickest, easiest thing I can do, and it can offer me a lot of good information so I can make a preliminary decision.” 

When reports are slim, reaching out to a salesperson and brainstorming possible solutions can help you reach a decision faster. For example, requesting trade or bank references could take a bit, but if the customer reaches out to their references directly, it could help move things along more quickly. 

“The reason for having a strong relationship with my salesperson is exactly for these types of situations,” Daugherty said. “We can better navigate these stressful scenarios, and if I do have to tell them I can’t extend the credit line they want for their customer, they trust that I am not just feeding them a line.”  

When there isn’t enough information readily available to support a credit decision or the information available does not support the level of credit requested, creative solutions may help with a preliminary credit extension.  

“When a customer requests multiple loads and it’s more credit than we’re able to really qualify them for in that hour, we’ll propose a more out-of-the-box solution,” Mitchell said. “We might ask them to pre-pay, always with the goal of getting them in the door and building that customer relationship so that we can eventually extend credit.” 

Depending on the industry you operate in, these requests might pop up more often. Creating a system to help process influxes of urgent credit applications can help.  

“Time is always a factor, so I’ve streamlined my credit review process by implementing a credit management platform that automates data retrieval—eliminating the need for manual research,” said Jessica Holt, CBA, director of credit and collections at Soligent Distribution (Dallas, TX). “This efficiency allows me to process a credit application in under five minutes. I also find it helpful to establish a predefined threshold for credit limits I’m comfortable extending when full documentation isn’t immediately available.” 

When it comes to quick credit approvals, credit managers must not lose sight of potential fraud because fraudsters often stress the urgency of an order and entice salespeople with a large purchase. 

“When we review a credit application, even when we’re looking to do a quick turnaround, we are fraud vetting them,” Mitchell said. “We are checking that their address is legitimate, that their phone numbers match what is listed on their website and how long their domain has been active. If anything looks funny, we will tell the salesperson, ‘Hey, listen, this looks a little odd to me, I have some questions. Can you go back to your contact and get me these answers and then I can get your response on your credit.’” 

The bottom line: When facing urgent requests for credit, credit managers are asked to find a balance between speed and risk. It is crucial that they create systems within their departments, whether it is streamlining credit requests or automating a portion of their credit approval process, that help them navigate these scenarios. Above all else, it is important that credit managers know when to resist pressure and deny a credit request.