7 tips to reduce your company's credit risk

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Research reveals a worrying reality. Credit risk in Brazil is increasingly high due to high default rates. There are 62 million people who are unable to continue buying on credit because they are unable to honor their installment payments .

The total loss to the country's economy is more than 90 billion reais, almost the nepal phone number list of all the wealth produced by Paraguay, our South American neighbor. Therefore, the times demand that companies prevent defaulting on their loans by finding solutions to avoid granting credit to those who cannot pay.

This is what we will discuss in the rest of this post. Stay tuned!

1. Request documentation
Fraud is one of the most common crimes in Brazil. It is an attack on property, in which the criminal obtains an advantage for himself by inducing the other party into error.

This is a risk for businesses in general, given that this type of behavior is growing even in regions outside of Brazil's major cities . Therefore, those who work with credit risk need to pay extra attention to this fraudulent behavior.

Requesting documentation before making a sale on credit is the first step you should take to avoid being a victim of bad faith. When checking the documents, carefully check that what was presented does not have any signs of tampering. If necessary, compare them with versions of legitimate documents to ensure their authenticity.

2. Consult credit protection agencies
Selling on credit is a necessity, both for the seller and for the consumer. In view of this, the existence of credit protection agencies is essential, which act as guardians for retailers, wholesalers and all those who sell in general.

Therefore, the recommendation is that you never fail to consult the records of these entities for every installment sale.

3. Search the buyer's history
So far, the measures outlined to reduce credit risk do not require ongoing effort on the part of your company. However, it is possible for you to develop your own protection system, as long as you maintain a database of your customers.

Based on information about the relationship each buyer has with your company, over time it is possible to form profiles. You will notice that there are those who pay on time, while others default more frequently.

Please note that in some cases, the buyer may not have any irregularities with their documents, nor may they have a bad credit rating. However, if a query to your database reveals that they were a bad payer in the past, then it will be possible to avoid a new “relapse”.

4. Keep customer history
In addition to business information, it is also useful for your company to keep its customer history up to date. Try to always keep up-to-date information and data about customers who are companies, whether or not they are registered with active debt, and anything that may reveal a bad payer profile. A non-existent or false address generally indicates suspicious activity.

Understand that a customer who was a good payer in the past may be experiencing difficulties now, due to reduced revenue, loss of customers, lag, and other reasons. As a solution, there are online tools that scan public records, updating customer data with CNPJ automatically. We will talk about this in more detail in the topic on technology.

5. Send payment reminders
Anyone who sells in installments knows the meaning of the expression “snowball” very well. The sooner a late payment is made, the lower the interest and fees charged due to failure to meet deadlines.

Therefore, the sooner your customer is alerted, the greater the chances that your company will receive what is owed to it, without delays. Otherwise, if a debt drags on for too long, then the negotiation becomes more complex, after all, we all have fundamental expenses, right?

While an installment stops being paid, other payments continue to be made normally by the defaulting company. Thus, the snowball increases, with enormous losses for your business. In short, time is an extremely decisive factor in mitigating credit risk. Try to anticipate and don't let the snowball form.