Credit Management July and August 2021

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OPINION AUTHOR – Neil Munroe the current players in the market. One well known example of this is Alibaba with its Ant Financial arm. As these platforms play an increasingly important role in the provision of finance there has been some concern over the fact that they operate outside the financial services regulatory infrastructure that protects individuals and businesses and prevents systemic shocks. In China, where a number of the e-commerce platforms are based, action is now being undertaken to ensure that the financial services arms are required to obtain the necessary licences and permissions. CHANGING LANDSCAPES So taking all of these developments into account there is no doubt that the data landscape is changing, and will continue to change further as a result of the pandemic and the move to digital. So what is going to happen with all this new alternative data? Will credit providers be able to use it? Will it replace traditional data or work alongside it? There is no doubt that traditional data sources and risk models may not be fully updated and well-calibrated to provide an accurate assessment of an individual’s or business’s capacity to repay in the post-pandemic reality. Traditional risk models, whether offered by credit information providers or built in house by credit providers, will need to be adapted. At the same time new analytical tools will be required to analyse the new alternative data that is available and incorporate it with traditional data to optimise the credit risk assessment. With the volume and velocity that the new data brings there is a need for new technology to be able to process and analyse it. Hence the interest in the industry in Artificial Intelligence (AI) and Machine Learning (ML) applications. Credit information providers are already undertaking a significant amount of work on how these new technologies can be utilised internally and externally for clients and credit providers should expect to see new products and services being developed using these tools. In any application, the key to their acceptance will be the transparency and explain ability of the decision that is made. The openness of the process is probably not an issue when the ‘computer says YES’ but it will be an issue when the ‘computer says NO’. These concerns have already been picked up by regulators who are keen to ensure that there is transparency about what data is being collected on individuals and businesses and how it is being used. Governments and regulators have been struggling to catch up with the fast paced developments in AI and ML but are now starting to look to take action. For example the EU has recently laid out its proposals for regulation of AI which could have far reaching consequences on its use. Discussions are also starting in the US on the subject. SIGNIFICANT 9O0 The move to digital services spurred on by the pandemic can provide significant benefits to individuals and businesses but it can also lead to an increase in financial crime such as cyber attacks, fraud, data breaches and money laundering. For credit information providers these risks provide an opportunity, using their data and analytical capabilities, to offer services to credit providers to help identify and limit the risks. They have also highlighted their own vulnerability being such a key part of the financial ecosystem - recent high profile data breaches have highlighted this. At the Business Information Industry Association (BIIA – www.biia.com) we have seen significant investment over the last couple of years by the credit information industry in both securing their own infrastructure and acquiring businesses to support credit providers in combating the growth in financial crime and it is likely that we will see continued investment going forward. With the growing availability of data and the use of new technology there are growing concern from Governments and regulators about how individuals can maintain control over the use of their data and how their privacy can be protected. As a result, privacy regulations based on the EU General Data Protection Regulation (GDPR) have been implemented in a number of countries around the world. In some cases where the GDPR has been ‘cut and pasted’ into the new regulation it has resulted in some unfortunate unintended consequences such as limitations on the access to the data from outside the country, and specific requirement on consent which have in turn had an impact on the development of the credit information infrastructure. In Europe we are also starting to see as anticipated further clarification on the interpretation of the GDPR. Some of this interpretation could have an impact on the availability of data to credit information providers at a time when it could be argued that more data is required. It is clear with all that is happening that the world is going to be a very different place for credit information providers as we exit the pandemic. The changing data landscape and new technology will change the focus of the credit information industry, from one of data providers to value added service providers using their analytical and technology capabilities to deliver the services that credit providers will need to deliver their services in a digital world. Neil Munroe MCICM is Managing Director, CRS Insights Ltd, Deputy Managing Director, BIIA, and Deputy Chair, International Committee on Credit Reporting. He has more than 35 years’ experience in financial services and credit reporting industries. neilm@crsinsights.com There is no doubt that the move to digital services can provide significant benefits to many. But as we have also seen it can increase the risks of financial crime, including cyberattacks, fraud, data breaches and money laundering. Advancing the credit profession / www.cicm.com / July & August 2021 / PAGE 22
ADVERTORIAL 7 best practice tips for better credit control With credit management more important than ever post lockdown, CICM Corporate Partner Satago advises on how you can get on top of your credit control…and stay there. WE’VE all been there. You invoice a customer promptly, include all relevant payment details in your email, but when you come to check your accounts on the due date, no payment has been made. You spend the next few days chasing payment and every day that passes negatively affects your business’ cashflow. But it doesn’t have to be this way. ESTABLISH THE RIGHT COMMERCIAL RELATIONSHIP FROM THE OUTSET Winning a new customer is an exciting time for your business, but it’s important that you start off on the right foot. Remember, customers who owe you money are less likely to book work with you in future, so don’t offer them credit unless you’re sure they’ll be able to pay on time. It’s better to build a trusting commercial relationship over time through regular, prompt payment than to offer overly generous payment terms before that trust has been built. ALWAYS RUN RISK ASSESSMENT ON NEW AND EXISTING CUSTOMERS They might be a well-known company or even a good friend, but unless you’ve run proper risk analysis on your customers, you have no way of knowing what their credit score is and how promptly they pay their bills. Use a professional risk analysis tool – such as Satago – to find out your customer’s risk band before you agree your payment terms. Remember, the right terms are always the ones that work best for you. GET TO KNOW THEIR PROCESSES Card, BACS, cash? People pay their bills in different ways and many businesses have lengthy processes which can cause delays. When sending an invoice, make sure you get the contact details of the person who will be processing your payment so you can confirm: • Which payment method they prefer • What their sign-off process is • If you need to be added to a list of preferred suppliers • What extra information needs to be included on the invoice. Tackling these questions early on will save you a headache in the long run. SEND REMINDERS SEVEN DAYS BEFORE PAYMENT IS DUE Often, invoices are paid late for simple reasons, such as the right person being on holiday. By sending a reminder a week before your payment is due you can avert these issues before they become a problem. This is where automation can really help. With Satago for example, you can set automated payment reminder emails, monthly statements and thank you emails to send on specific days before and after payment is due. KEEP A RECORD OF ALL COMMUNICATION WITH CUSTOMERS Keeping a trail of communication with your customers can be crucial if queries arise around payment. What if finance loses the original invoice? Or the person who booked the job leaves the company? Whatever happens, by keeping a record of all emails and calls, you can ensure you have all necessary information to hand should a dispute arise. ALWAYS BE PROACTIVE AND PROFESSIONAL IF LATE PAYMENT OCCURS Even if you do everything by the book, late payments can still occur. When this happens, it’s important to follow a consistent strategy to ensure payment is made as soon as possible: • Set automated reminders to send on specific days after non-payment • Highlight your payment details and any late fees in the body of the emails • Include the original invoice in all emails • If payment is not made after a set date, escalate the issue. EVALUATE EXISTING CUSTOMERS It’s important to continue analysing your customers over time. If their credit score improves or they earn your trust through regular prompt payment, you can reward them with more generous terms. On the other hand, if an existing customer’s credit score declines, you may need to adjust your payment terms to avoid putting your business at risk. Satago monitors all your customers automatically and notifies you of any changes to their risk profile, so you’re always on top of things. At Satago, we’re committed to supporting SMEs through automated credit control, data-driven risk insight and flexible invoice finance. To start your free trial, visit satago.com Satago Advancing the credit profession / www.cicm.com / July & August 2021 / PAGE 23
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Page 5 and 6: CMNEWS A round-up of news stories f
Page 7 and 8: NEWS ROUNDUP CICM partners with CES
Page 9 and 10: INSOLVENCY Changing times The IPA r
Page 11 and 12: OPINION AUTHOR - Ben Marsh because
Page 13 and 14: INTERVIEW AUTHOR - Sean Feast FCICM
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Page 19 and 20: ENJOY THE JOURNEY COME ABOARD SEE H
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Page 25 and 26: COUNTRY FOCUS AUTHOR - Adam Bernste
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Page 37 and 38: PROFILES - MARKETING AND EDITORIAL
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Page 43 and 44: EDUCATION & MARKETING CICM Virtual
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Page 51 and 52: OPINION AUTHOR - Mark Sheldon The m
Page 53 and 54: OPINION A year of two halves Beware
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Credit Management July and August 2021

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