Credit check: Is your customer solvent?

Georg Schönauer is the owner of an online store for industrial painting and automotive accessories. His company is already making a turnover in its second year that could give cause for satisfaction. Nevertheless, Georg Schönauer is shaking his head these days: customers have already failed to pay their bills several times - and the trend is rising. In fact, there are several million so-called debt collection cases in Switzerland every year. These are cases in which a customer does not respond to a company's outstanding receivables despite a reminder and does not fulfill his payment obligation. What means can companies - large or small like Georg Schönauer's online store - use to defend themselves against this? "If a company has new customers on a regular basis and lacks payment experience from the past, it is possible to use a reminder. Credit rating check to prevent payment defaults from occurring," says Martin Honegger, Head of Business Information at Intrum Justitia.

How a credit check works

Credit checks are useful for companies of all kinds. By means of a monitoring system, they can also monitor existing customers (persons/companies). Any changes in creditworthiness can thus be seen at a glance. "Since 70 percent of payment defaults occur with existing customers, this is a very important instrument for every company," explains Martin Honegger. "In the case of companies with a high volume of payments per transaction, an additional so-called Fraud Audit recommended to detect fraud at an early stage."

There are two types of credit checks:

• Interface solution:
  1. With the interface solution, the customer enters his address data and date of birth directly in the address form of the online store.
  2. The creditworthiness check then takes place in the background (immediately when the form is sent).
  3. Depending on the rating, appropriate payment methods are suggested to the customer, for example, payment in advance or payment via invoice.
• Manual solution:
  1. They enter the address data and the date of birth from their customer into the credit decision tool.
  2. The credit decision database provides information on companies around the clock, such as debt collection information, business reports and authorized signatories. In the case of private individuals, it provides a rating that shows their creditworthiness.
  3. Depending on the rating, you then decide which payment options you will offer the customer.

"We proceed according to several logical steps when checking creditworthiness," says Martin Honegger. "We integrate our collection payment experience and combine it with information from various agencies and authorities. In this way, we provide a comprehensive database that fully covers our customers' needs."

Low effort

In small and medium-sized companies, the interface solution usually works via plug-in and can be linked without much effort. In large companies, this is done by means of in-house development, i.e. a separate channel, or equally via plug-in. The manual solution also requires very little effort: companies can access the credit decision database with a user ID and a password.

Georg Schönauer is also convinced by the credit check; he opted for an interface solution for his online store. He knows: now he can turn to other business activities without worrying - he no longer has to send countless reminders to customers and constantly worry that they won't pay his invoices.

Facts about the credit check

1. Intrum Justitia's creditworthiness database is unique in Switzerland. The volume of debt collection cases at the end of 2016 was around CHF 3.8 billion.
2. Both positive and negative payment information is included in the assessment.
3. Intrum Justitia makes 30 million automated and 80,000 manual credit decisions per year.
4. The B2B and B2C data universes are interconnected. 5. credit checks are tailored to the needs of individual companies.
5. Since over 70 percent of bad debt losses are incurred by existing customers, Intrum Justitia developed a detailed monitoring system. There, you can see, for example, a change in management or creditworthiness.
6. The costs for the credit check can be planned using a flat rate price model.
7. In order to prevent fraud, an additional fraud check is recommended for high volumes per transaction. With its proven specialists and modern technologies, Intrum Justitia offers the highest level of security with its multi-stage fraud process.

Contact for more information:

Intrum Justitia AG, sales.ch@intrum.ch, +41 44 806 85 57

Author: Christian Wild is a freelance copywriter.