e–book

5 Essential Credit Management Workflows for

2X Faster Credit Decisions
This e-book explains the five essential credit management workflows
for every business to optimize credit operations for fast, accurate
decisions based on dependable, up-to-the-minute information. The
findings are based on responses from 271 companies to a very
extensive questionnaire which gathered data on a number of areas
related to credit management and business performance.
 5 Essential Credit Management Workflows e–book

Contents
Overview ............................................................................................................................................. 3
1. Essentials for Modeling a Workflow ............................................................................................... 4
2. Five Must-Have Credit Management Workflows ............................................................................ 5
2.1 New Credit Application Workflow ......................................................................................................................... 5
2.2 Blocked Order Workflow ....................................................................................................................................... 6
2.3 External Events Workflow ..................................................................................................................................... 7
2.4 Periodic Credit Review Workflow .......................................................................................................................... 8
2.5 Collateral Expiry Workflow .................................................................................................................................... 9
Conclusion ......................................................................................................................................... 10
About HighRadius .............................................................................................................................. 12
HighRadius’ Integrated Receivables Platform ........................................................................................................... 12

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Overview
Credit management is an important business function in any organization. Credit management, also called
credit control, consists of multiple techniques to ensure that buyers pay on time, credit costs are kept low,
and past-dues are recovered without damaging the relationship with customers.

Credit risk management should be seen as one of the unheralded drivers of B2B success and as a
fundamental aspect of revenue enhancement and risk containment. Poor credit policies, lax credit terms,
inefficient credit reviews, and broken correspondence chains are common potholes on the road to shorter
collection cycles, reduced financial risk, and improved cash flows. Businesses spend precious time and
resources reducing liquidity risk exposure and ensuring smooth cash flow. This effort is distracting and time-
consuming, and companies need to look at smarter mechanisms for improving credit risk management, not
just for better financial yields but also to facilitate compliance with corporate governance rules.

To firmly establish a credit risk management culture, forward-looking companies are increasingly seeking
help from new technology, and their weapon of choice is automated credit risk management delivered via
workflows. Credit management workflows enforce credit policy while providing adequate support for
increasing top-line business growth. They eliminate the convoluted process and time-consuming work of
credit decisionmaking, drastically slash response times, and improve compliance while reducing related
overhead costs. This e-book explores the essential elements for modeling and executing credit management
workflows and the five most significant workflows that help organizations leverage credit operations as a
strategic function to drive liquidity while maintaining optimum business risk level.

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1. Essentials for Modeling a Workflow

Credit management workflows facilitate automation of the process flows relating to credit data and
decisions associated with them. By automating parts of the business process of extending credit to a
customer, credit workflows reduce the risk of error, standardize a set of consistent practices, and enable
tremendous improvements in the flow of information.

There are five essential elements that go into the modeling of an optimized credit management workflow:

1. Origination: Every workflow has an origination point – an execution condition or a work function (also called a
task/atomic workflow) that is necessary for the workflow to be initiated. It is used to specify if and when a
given workflow should be executed. For instance, for a credit management workflow, an origination point
could be a new sales order, a blocked order, a periodic review notice or a new credit limit request by an
existing customer. When the origination point is triggered, the workflow is set into action and the subsequent
workflow instances are executed, contingent on their respective constraints and requirements being met.

2. Information: Every workflow operates on a set of data or information (documents, forms, tables et al.) to be
processed and transferred from one workflow instance to another. The information component assigns input
and output parameters to single tasks and, hence, covers data dependencies between them. For example,
when a buyer submits a new credit application, the information that is essential to carry out the next step of
assessing that application is the application form with all of the relevant buyer information. Backup data and
decision inputs (credit reports from rating agencies, credit bureau and trade groups, public financials, income
statements, balance sheets, key financial ratios, and insurance details) to assess applications and for periodic
reviews and inter-departmental correspondence for information and approval/denial of credit decisions are a
few of the other information components of a workflow.

Individual tasks can only be plugged together if the output of previous step is a mandatory input to the next
step. This form of data dependencies is called data flow and is an important functionality to guide and control
the flow of logical units of work associated with a business process.

3. Operations: This component describes the elementary operations performed by resources using the
workflow. All credit management workflows require a certain set of actions to be performed at specific stages
of the process. These operations could be to create, review, modify, or approve the information component
that flows as an input of the given step. Assessing the credit application form details, reviewing external credit
reports of the buyer, assigning a credit limit, initiating inter-departmental correspondence, approving/denying
a decision, and modifying pre-assigned credit limits of buyers are a few of the operations associated with a
credit management workflow.

4. Workflow Efficacy: Underlying improvements in the credit operations design and the empowerment of credit
teams with structured workflows could drastically improve the accuracy of credit decisions made by the team.
A credit workflow contributes to accurate and reliable credit decision making by enabling faster and easier
procurement of rich input data from multiple sources and a platform that facilitates real-time collaboration
between different functional units and respective stakeholders with less effort. This translates into process
improvement at multiple levels which is reflected in improved KPIs and business metrics such as DSO,

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percentage bad debt write-offs, cash conversion cycles, and accounts receivable turnover.

5. Workflow Efficiency: Implementing accurate credit decisions is not the sole objective of the credit
department. The timeliness of these decisions is an equal contributor to successful credit operations. By
reducing the time between credit request and decision, a business and its customer both come out ahead.
Companies stuck in outdated operations may eventually arrive at the correct credit decision, but it’s often too
late to use that information optimally. For example, not leveraging cross-sell opportunities at the time of sale
because the final credit decision is rendered later in the process is a direct dollar loss from the bottom line.
Efficiency and expediency lie at the core of credit management workflows. They improve process efficiency
and provide a framework that enables fast, accurate credit decisions based on dependable, up-to-the-minute
information.

2. Five Must-Have Credit Management Workflows

As part of their daily routine, the credit analysts need to execute various tasks. These include reviewing the
credit-worthiness of business partners, deciding credit limits assigned to the business partner, verifying
credit-blocked orders, and so on. Most of these scenarios are repetitive and comprised of a similar set of
tasks. These tasks involve different members of the credit team – including the analyst, supervisor, manager,
director, and treasurer. Workflows are generally designed while keeping in mind the delegation of authority
on the credit limit assigned to customers.

Workflows automate a majority of these repetitive tasks and divide them among different users so that
everyone can concentrate on a particular area. They bring transparency and proactivity to credit risk
management. While organizations add industry and company-specific workflows for credit management,
there are five workflows that are globally recognized by credit and A/R professionals as must-haves for any
organization working towards an optimized credit management system.

2.1 New Credit Application Workflow

The Credit Application Workflow manages the process flow of capturing buyer credit application data,
gathering and analyzing their credit data, and making and implementing credit decisions. The workflow
encompasses the following sub-processes:
a. Receive the credit request – The point of origin for this workflow is the generation of the credit
request by the buyer through the submission of a credit application. The workflow captures the data
provided by the buyer for analysis and processing of the request to extend credit lines.
b. Gather analysis data – For credit analysis of a customer, multiple data points are required. The
analysts log into external credit rating agency websites and pull credit reports. These reports contain
data including risk scores, average days in arrear, and so on based on the independent evaluation of
the agency for business-to-business customers. The workflow initiates correspondence with internal
business teams and buyer references to validate information and pulls credit reports, public financials,
bank guarantees, income statements, and insurance details. This information is collected, scanned,
indexed, and processed through subsequent validation checks.
c. Calculate credit score and assign credit limit – The workflow calls the scoring engine and calculates a
credit score based on the automation rules defined as per the credit policy and a credit limit is arrived

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at. If no credit scoring model exists or if a scoring model exists but data points are missing, then the
workflow routes this function to a credit analyst to assign an appropriate credit limit to the buyer.
d. Initiate approval process – All credit decisions need approval from the concerned authority at the right
stage. The workflow notifies the designated authority of the recommendations submitted by the credit
analyst after performing the credit analysis or those generated by the automation engine based on
pre-defined rules, along with all of the supporting documents needed to accurately decide whether to
grant or deny credit to the buyer.
e. Notify all stakeholders – The workflow sends notifications to interested parties when a
recommendation is approved or rejected. The credit analyst is notified of the decision to update
customer status in the system (business partner/customer master) and complete the onboarding
process. An appropriate notification can also be sent to the buyer regarding their application status.

The customer onboarding process involves an exchange of sensitive information back and forth between
the customers and credit department. The process is prone to breakdowns due to correspondence issues
such as lost documents, missing information, missed out emails and phone calls, misinterpreted details,
management sign-off, and much more. This results in dissatisfied customers and undue delays in
application review. The turnaround time of customer credit review can make the difference between
closing and losing the deal. At the same time, accurate decisions cannot be a trade-off for faster review.
Due time and diligence need to be invested in analyzing the applications and conducting thorough
background validation.

The objective of the credit application workflow is to eliminate the convoluted process and time-
consuming work of onboarding new customers, accelerate the approval of new customers, and improve
compliance while reducing related overhead costs. One way that companies could differentiate
themselves is by adopting tools like online credit application, standardized credit scoring rules, and e-
signatures. The old days of turning in paper applications and then waiting for mail or a phone call to arrive
with the decision of whether credit would be offered or not are gone. E-processing simplifies things for
creditors and customers while reducing the amount of paperwork customers are responsible for,
attracting more applicants overall.

2.2 Blocked Order Workflow

An order amount exceeding the discretionary credit limit of the customer is one of the most common reasons
for a trade order getting blocked and not released to fulfillment. The blocked order workflow manages the
process flow of resolving blocked orders by expediting due checks, approvals, and collaboration involved in
the following sub-processes:
a. Notify the credit department and the customer - When an order exceeding the assigned credit limit of
the customer is placed, it is blocked to prevent its release to fulfillment. The workflow automatically
notifies the credit analyst and also sends automated correspondence to the customer to give them an
update on their order status.

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b. Analyze blocked order case - The credit analyst needs to analyze the case for the appropriate blocked
order resolution strategy. Based on the customer portfolio and their payment history, the analyst could
manually release the order by creating an exception or revise the credit limit of the customer by
performing an ad-hoc credit review. The required approvals and information exchange with other
business teams for this process are facilitated by the workflow.
The case could be assigned to the collections team to recover payment for previous orders and free up
the credit limit. The workflow initiates automated correspondence with the right stakeholders along
with all of the backup data (past orders, payments, and other order attributes) for an easier and faster
payment recovery.
c. Resolve blocked order - Based on the outcome of the previous process, the credit data of the
customer is revised in the system, and the workflow automatically updates the order management
system to release the order to fulfillment.

One of the major challenges that the team faces in speeding the resolution of blocked order cases is the time
lag in getting information from the order management system. In the absence of real-time information
flowing in from the system, the credit department is in a constant race against time in processing and
reviewing these orders. What adds to the complexity of the situation is the lack of backup data and order
statuses at the analyst’s disposal. Customer experience also takes a hit when the customer calls to get an
update and customer service agents need to cherry pick order statuses from all of the different systems to
give a straight answer.

Blocked order workflows eliminate the time lag in information relay between departments. Expeditious
order release is facilitated through a one-stop shop for all of the analysis data and electronic collaboration
for approvals and e-signatures. The best performing companies are also able to enhance post-sale
experiences by providing customer service representatives with the tools to effortlessly locate past orders,
payments, and items based on any given order attribute – all with a few clicks.

2.3 External Events Workflow

Events such as bankruptcy, rating downgrades, and financial results could adversely impact a customer’s
ability to honor commitments WRT open A/R. This is where credit departments conduct periodic credit
reviews and stay on top of critical accounts to reduce credit risk exposure. One of the ways to do that is to
integrate a workflow to credit bureaus such as D&B, Experian, Coface, or Euler Hermes to fetch data and
proactively conduct credit checks to revise credit limits or collect on past-dues. The external events workflow
is triggered whenever a customer gets any agency monitoring update and manages the process flow for
updating the credit data in the system for optimum credit risk levels.
a. Capture agency monitoring data - The workflow captures real-time data from credit agency rating
downgrades and the public financial results of companies and keeps a constant track of changes in the
credit data of your customers.

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b. Alert credit analyst - The credit analyst assigned to that account is alerted to the event, and the credit
data is collected, indexed, and made research ready. The analyst performs validation checks and
analysis of the data to arrive at the recommended actions to be taken for that account.
c. Initiate approval process - The workflow notifies the designated authority of the recommendations
submitted by the credit analyst after performing the credit analysis or that generated by the
automation engine based on pre-defined rules, along with all of the supporting documents for
approval.
d. Update customer credit data - Based on the decision of the sign-off authority, the workflow could edit
customer credentials in the system such as the agency rating, key financial information, and risk class
or calculate the credit score and assign the updated credit limit.

Access to real-time customer credit information from credit monitoring services is non-negotiable for
efficient risk management in any business. The sheer amount of time and manual effort required in this
process proves to be a big deterrent for companies, especially when they have a large customer base
spread across multiple regions. Failure to adopt a pro-active approach to managing risk exposure could
prove to be fatal in the long term with the credit department extending credit lines to high-risk
customers, thereby piling on bad debts.

The external events workflow eliminates the wastage of time and resources in tracking customer credit
data, provides up-to-the-minute information of changes in customer financials through multiple sources,
and facilitates timely course correction through faster decisionmaking and approval. It is an efficient,
error-free, and cost-effective way of maintaining optimum risk levels with minimal manual intervention.

2.4 Periodic Credit Review Workflow

One-time assignment of credit limit at the time of customer onboarding with no periodic review is a sure-fire
way to a doomed credit management system. Businesses need to conduct periodic reviews of the credit limits
assigned to their customers so as to ensure that appropriate credit terms are extended, and you are doing
business at the optimum risk exposure level. The periodic review workflow automatically identifies accounts
for review and places them on the analyst’s worklist. It manages the process flow of assessing the customer
portfolio on multiple parameters, realigning the customer credit portfolio while reducing overhead costs.
a. Analyze payment trends - One of the most important factors when assessing of the credit limits of
your customers is their payment trends. The workflow allows users to analyze the payment behavior of
customers based on multiple parameters such as average days to payment, past due date, payment
terms, open item values, average sales of previous months, and average arrear details. These data
points give meaningful insights for determining accurate credit limits and risk category at the account
level.
b. Check collateral expiry - The workflow checks for expired or expiring collateral such as bank
guarantees, securities, and insurance documents. by comparing the expiry date with the current date
and alerts the analyst if the request for valid collateral needs to be raised for any accounts. Subsequent
work processes get triggered as explained in the Collateral Expiry Workflow section below.
c. Check credit data - The workflows reference data from credit reports, public financials, bank
guarantees, income statements, and insurance details. This information is collected, scanned, indexed,
and processed through subsequent validation checks.

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d. Recalculate credit score and reassign credit limit – The workflow recalculates the credit score based
on the aforementioned data points, and the credit limit is realigned.
e. Initiate approval process – The workflow notifies the designated authority of the recommendations
submitted by the credit analyst after performing the analysis along with all the supporting documents
for accurate decision making to modify the credit limit, if at all. Accordingly, the account is updated in
the system to reflect the relevant credit limit, risk category, new review date, interest indicator, and
hard block parameters

Organizations still stuck with outdated systems for credit management fail to implement a culture that
supports regular and accurate reviews of customer credit profiles. The process requires collaboration with
external agencies for credit information and internal business teams for customer data, approvals, and
sign-offs. In the absence of a framework that facilitates an easy process flow, businesses are unable to
lower risk exposure without bearing the cost of establishing a separate system for it.

Workflows simplify the convoluted process of performing periodic reviews and accelerate the process
through tighter integration with other business units while improving compliance through a taut audit
trail. Top performing businesses strategize their periodic reviews by segmenting their customer base
based on business size, risk category, payment behavior, or other relevant parameters and determine the
frequency of review for each group accordingly. This helps them prioritize high-risk or high-value
customers who require a more frequent credit review while at the same time managing to touch base
with all business partners at regular intervals without any segment falling through the cracks.

2.5 Collateral Expiry Workflow

In order to issue credit profitably to businesses, creditors need to be confident that loans will be repaid in a
timely fashion, in accordance with credit covenants. Customers submit guarantees that often provide for a
specific remedy to the creditor if the debtor turns delinquent and does not return his debt. Credit guarantees
are very helpful to avoid the fear of non-payment. The fact that default leads to forfeiture of the collateral
reduces the chances of risky behavior or fraud. However, this guarantee does nothing if it has expired.
Therefore, credit teams need to stay on top of the validity of guarantees submitted by customers. The
collateral expiry workflow identifies securities that have expired for a partner and puts the partner in the
corresponding user’s worklist. This workflow also recalculates the approved credit limit value by considering
valid securities and triggers Credit Review workflow if needed. The following workflows are performed as part
of this workflow:
a. Alert credit analyst - The credit analyst assigned to that account gets notified of the collateral expiry
for him to perform validation checks and initiate a request for fresh securities and guarantees such as
letters of credit, credit insurance, mortgages, or bank guarantees.
b. Request valid collateral - The workflow, at the analyst’s discretion, could initiate correspondence with
the customer or third-party guarantors requesting guarantees or securities with updated validity
tenures.
c. Revise credit limit - Once the updated collateral is made available or in case of non-availability of
required documents or documents with unfavorable security terms, the analyst could revise the credit

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limit of the customer and trigger the credit review workflow to recalculate the credit score and assign
an appropriate credit limit.

One of the main challenges that make this workflow a must-have for any credit department is the inability
of teams to manually track the validity statuses of multiple documents for each of their customers. As a
result, companies either have to invest resources dedicated to this process or the system falls off the grid
and faces high risk exposure. This workflow helps businesses implement a tight grip on customer
guarantees, thereby ensuring that risky customer behavior does not dig a hole in their bottom line.

As a best practice, leading organizations adopt a more proactive approach in tracking collateral
expirations by triggering this workflow before the guarantee or security expires. The workflow is initiated
when the validity date is at least a week in advance of the current date, so the credit analyst is able to
fetch renewed collateral before the eleventh hour.

Conclusion
As outlined above, credit management is the lifeblood of all businesses. The function continues to increase
in importance within a company’s management hierarchy. More and more companies are making a value
judgment by comparing the risk of non-payment (client insolvency) versus additional sales volume – an
elusive balance that can be struck only through an efficient credit management system.

Not long ago, credit risk management was an excel spreadsheet in the CFO’s office. Technology has come a
long way since then, but these legacy solutions tend to have outdated approaches to data management with
manual processes for updating data, manual collaboration with internal and external business teams, and
high IT support costs for deployment and installing periodic patches and updates.

Innovative new technology solutions extend the use of credit risk management across the enterprise
through a cloud-based technology platform. Cloud-based solutions offer the benefits of reliability, mobility,
and scalability while eliminating IT, data infrastructure, and upgrade costs. These solutions enable dynamic
credit management workflows and process improvements that result in not only lower risk but improved
response times, reduced costs, and better customer service.

Workflows bring transparency and proactivity to credit risk management. They can be deployed to
streamline all business processes linked to credit management and help organizations deal with routine
challenges in following ways:

• Faster customer on-boarding and reduced overhead

• Real-time access to critical credit data for accurate credit decision making
• Better transparency and accountability across all process hierarchies
• Limited financial impact from vagaries in customers’ financial situations
• Centralization of data across all business units and process levels
• Enterprise-wide implementation of standard credit policies
• Increased team productivity and efficiency by reduction of errors and re-work
• Improved customer experience along with strong support to top-line business growth

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Modern technology gives B2B organizations a proven ability to reach their goals. Its effect is real, immediate,
and increasingly indispensable for any business looking to not just survive but thrive in today’s competitive
world.

For a real-world implementation of these workflows, check out this video by C.B. Ananthan, Manager, Global
Credit and A/R Reporting at Air Products and Chemicals where he explains how his team automated credit
operations for 125,000 customers.

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About HighRadius
HighRadius is a Fintech enterprise Software-as-a-Service (SaaS) company. The HighRadius™ Integrated
Receivables platform optimizes cash flow through automation of receivables and payments processes across
credit, collections, cash application, deductions, electronic billing and payment processing.

Powered by Rivana™ Artificial Intelligence Engine and Freda™ Virtual Assistant for Credit-to-Cash,
HighRadius Integrated Receivables enables teams to leverage machine learning for accurate decision making
and future outcomes. The radiusOne™ B2B payment network allows suppliers to digitally connect with
buyers, closing the loop from supplier receivable processes to buyer payable processes.

HighRadius solutions have a proven track record of optimizing cash flow, reducing days sales outstanding
(DSO) and bad debt, and increasing operational efficiency so that companies may achieve strong ROI in just a
few months. To learn more, please visit https://www.highradius.com/.

HighRadius’ Integrated Receivables Platform

Integrated Receivables is a solution to optimize accounts receivable operations by integrating all receivable
and payment modules to work asinto a unified business process. At the core of the The Integrated Receivables
platform are solutions for credit, collections, deductions, cash application, electronic billing, and payment
processing – covering the entire gamut from credit-to-cash.
The HighRadius™ Integrated Receivables platform stands out by enabling every credit and A/R operation to
execute real-time from a unified platform with an end goal of lower DSO, reduced bad-debt, and faster dispute
resolution while and improveing efficiency and accuracy for, accuracy for cash application, billing, and
payment processing.
HighRadius™ Integrated Receivables leverages Rivana™ Artificial Intelligence for Accounts Receivable to
convert receivables faster and more effectively by using machine learning for accurate decision making
across both credit and receivable processes. The Integrated Receivables platform also enables suppliers to

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digitally connect with buyers via the radiusOne™ network, closing the loop from the supplier Accounts
/Receivable process to the buyer Accounts Payable process.

Corporate Headquarters http://www.highradius.com/

HighRadius Corporation info@highradius.com
11451 Katy Freeway, Suite 650
Houston, Texas 77079
(281) 968-4473

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