Identify risks and opportunities within your portfolio of customers. One of the quickest ways to impact the bottom line is to effectively manage risk and find new revenue opportunities within your own customer base. Portfolio Scoring enables you to assess risk by viewing up-to-date information on your entire customer portfolio, including how accounts are paying other creditors. The information can help you make timely decisions on how to treat risky customers and reward good ones. We recommend regular portfolio scoring with Account Monitoring ServiceSM for the best results.

• Save Time — Scoring allows you to review your entire portfolio in a fraction of the time it would normally take.
• Receive Intelliscore PlusSM for every customer in your portfolio plus a summary of derogatory behavior, including bankruptcies, tax liens, judgments, collections, days beyond terms (DBT), median credit, high credit, legal balance and years on file.
• Batch scoring that fits your needs — monthly, bimonthly, quarterly or annually

Credit Portfolio Management — The Ultimate Guide

Understanding the foundations of Credit Portfolio Management

Credit Portfolio Management is the practice of managing and monitoring all aspects of your company’s credit portfolio. You can then proactively measure, track, and take action on emerging risks impacting your organization’s profitability. This includes understanding and measuring the impact on KPIs such as Days of Sales Outstanding (DSO), bad debt, disputes, and collections.

The power of Credit Portfolio Management lies in understanding your internal customer data to develop strong portfolio segmentation and treatment strategies. In your initial inventory of portfolio data, you may find your portfolios reside in different systems leading to information inconsistency. Alternatively, you may find information gaps in data leaving room for improvement. Those findings are common obstacles in establishing a portfolio baseline and are part of the initial evaluation step.

Instead of feeling overwhelmed with immediately fixing those problems, focus on uncovering the gaps to know how to prioritize efforts to make a meaningful impact on overall portfolio data integrity. With a strong understanding of your portfolio, you can begin building trends and take appropriate action to avoid potential problems down the road. Some actions include reviewing high-risk clients or increasing credit lines on low-risk high potential accounts.  Portfolio Management practices often use analytics through the use of predictive credit risk and fraud scores which help spot future risks before it’s too late.

Getting Started

The first step to effective Portfolio Management is taking an inventory of your portfolio and establishing a performance baseline. Your institution may have one or many portfolios based on how your organization structures its lines of business and products, and baseline performance may vary across these products.

Having a solid understanding of your customer data and what information is available to you helps determine what type of insights you can derive before you go outside looking for external data sources to use to standardize or augment your own internal data.  For example, many institutions use industry classifications like the NAICS (North American Industry Classification) or SIC Codes (Standard Industry Classification) to group similar businesses to assess industry risk and benchmark customer performance against their peers.

In your evaluation of portfolios, you may find data residing in various systems. Many companies already using an ERP (enterprise resource planning) system find it optimal to keep their Portfolio Management processes embedded in their current system. Then augment any data gaps with external data to increase the effectiveness of their programs. However, any changes or additions of outside data will likely require your technical team’s involvement when you’re working within your internal systems.

If you don’t have a full-featured ERP, or if tapping into technical resources requires some prioritization and planning, consider using Experian’s BusinessIQ website that allows organizations to import portfolio data, including your aging data, and track risks for their portfolios. You can manually import your portfolios with no IT involvement. Alternately, with some limited IT involvement, more progressive organizations use tip of the sphere solutions, such as Portfolio Integration, to set up automatic daily portfolio imports of your data into BusinessIQ. Once your portfolios are in BusinessIQ, you can use the website to track trends over time and set up alerts, so you are notified of credit changes occurring in the portfolio.

As you advance your techniques, you can begin increasing the sophistication of your portfolio management practices by introducing Portfolio Scoring, a process defined as appending credit scores and other credit risk data to all the accounts in your portfolio. Implementing ongoing Portfolio Scoring helps drive further automation into your Portfolio management program and can be used to benchmark your portfolio’s performance over time. Quarterly Portfolio Scoring is a standard industry best practice but will depend on your organization’s need for data refreshes on the portfolio. Since credit scores play a critical role in the portfolio scoring process, let’s break down the different types of credit scores and their uses

Contact MCB Business Credit to learn more about monitoring your portfolio – 706-823-6256