By Luke Matthews, Senior Business Development Manager – Queensland, CreditorWatch

Credit applications are a critical part of onboarding new customers. Put simply, a credit application is an essential contract that allows you to do business with a new customer. However, the manual and paper-based approach to client onboarding that many businesses currently use is time-consuming and open to human error. And, if you accept a customer that isn’t as creditworthy as first anticipated, it could mean your profit disappearing along with the goods and services you provided to them.

In our COVID-impacted economy, it’s critical to understand who your potential customers really are. In fact, of all my years in the industry, gathering vital information in a credit application has never been more critical to business success.

The issue at large 

Let’s examine the top issues often associated with credit applications and the customer onboarding process:

• Prospective customers unintentionally (or in some cases, intentionally) provide incomplete applications
• Struggling to understand illegible handwriting
• The time it takes to check information provided in a credit application
• Customers giving up on the process halfway through
• A crumpled or poorly photocopied paper-based application is not a very professional first impression with a potential new customer.
• Try to find a lost credit application when you need them in the future.

All of the above points make for a very laborious process – a process which means business owners or credit teams can’t dedicate the time they’d like to more essential tasks in the business. And, even once these applications are complete, they’re not foolproof. One of the most common issues we see is applicants using references that are from friends or family and aren’t entirely credible.

So how do you know if a business is a genuinely good applicant? It’s time to get serious about credit applications and streamline the process.

Time is money

For businesses, time is a precious resource. Onboarding great customers that won’t pose a credit risk to your business means you’ll benefit from a more stable company in the future and can focus on the day-to-day of the business.

Many businesses aren’t aware that tools exist to help automate the credit application process. These digital credit applications reduce the risk of human error and use online portals to make it simple to access and search through all applications during the onboarding process. Integrated with government databases such as ASIC and ABR, they can even auto-populate details as the application is being completed. This is a great win for your business and your potential customer.

An example is ApplyEasy which allows your business to check and validate potential customers’ data in real-time, eliminating paper entirely and minimising manual labour. Each application automatically undergoes a credit check which contributes to the final decision. Rules are customised for your business depending on the industries you work with, credit limit exposure and the type of products/service you deliver.

Credit? Check!

Merely gathering information via an electronic form is not enough. It is essential the information is validated during the credit decisioning process and you check the creditworthiness of a prospective customer by looking at their credit report. As well as greater efficiencies, truly automated applications also enable you to register a security interest on the PPSR when approving credit to new customers.

Some more advanced recommendations include checking cross-directorships to assess a directors past business history, identifying and credit checking the Ultimate Beneficial Owner (UBO) to see where your ultimate risk lies and view an entity’s current PPSR registrations to see who currently has a registered security interest over the entity.

They even work for trusts too, recognising a business structure based on its ABN, subsequently requesting additional information on the trustee and a copy of the deed.

Sign here, please

Traditionally, wet signatures have been used across the industry for signing documentation. Still, as the pandemic has forced many of us to work remotely, the opportunity for fraudulent activity through forgery has increased.

As a default, I’d recommend using electronic acceptance for new accounts, which expedites applications further by saving time and resources. Online credit application tools can also verify applicants with supporting identification documents, such as a driver’s licence, passport or IP address tracking, to mitigate this risk further.

Long gone are the days of arduous and time-consuming business credit application forms. These new digital onboarding processes provide your business with the support to know precisely who your customers are, with minimal effort. And, did I mention they are stored online for life?

This is just the beginning – watch this space as further innovations are introduced through open banking, digital wallets, bank account validation and further API automation.