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Five Key Steps to Designing a Bulletproof B2B Credit Application

overhead view of businesspeople at a table with laptops, evaluating business data.

Your company’s B2B credit application is a critical tool to help your organization assess the creditworthiness of potential customers, make smarter and better-informed credit decisions, and reduce the risk of future nonpayment.  Far too often, the business credit application is an afterthought – an outdated form developed internally decades ago, a hodgepodge of elements borrowed from other forms, or – worse yet – a generic form obtained online.  

High-performing credit departments take a more deliberate approach, putting enormous care into thoughtfully designing a B2B credit application to efficiently gather relevant, timely information from customers and enable prudent, informed business credit decisions.

This article discusses five key steps a credit department should take in designing a B2B credit application to help make informed credit decisions and to ensure prompt and effective collections throughout the customer lifecycle.

Step 1:  Start With Best Practices

There is no such thing as a one-size-fits-all B2B credit application.  However, credit management organizations, industry credit groups, credit management platform service providers, and even some of your company’s peers have put significant effort and thought into developing “best practices” B2B credit applications.  There is rarely a need to start from scratch.  Borrow from the efforts of others as a solid starting point.  Stand on the shoulders of giants.

Providers of online B2B software-as-a-service credit management platforms may include model credit applications or templates with their platforms.  These templates can serve as a helpful starting point as they reflect the collective experience of numerous subscribers and frequently include input from credit management organizations, credit groups, and credit professionals.  However, you should review any model form or template carefully to make sure the requested information is complete and pertinent to the needs of your business.  More often than not, at least some amount of customization is appropriate.

Step 2:  Evaluate Your B2B Credit and Collections Workflows

Once you have one or more sample credit applications, model forms, or templates as a starting point, it’s time to make your credit application… yours.  Start by thinking through your credit approval workflow.  Then think about the ongoing collections workflow, and finally about what happens once a customer becomes distressed and, in the worst case, defaults.  

Ask questions such as:

  • What other departments or business functions are involved in the credit origination process?
  • What other departments or business functions might be involved with collections down the road?
  • What information do we really need to evaluate the creditworthiness of a prospective customer?
  • What risks are unique to our industry?  To our target customer base?
  • What information will help mitigate those risks at the credit underwriting stage?
  • What information might help mitigate collection risks down the road?
  • What do our prior customer A/R write-offs have in common?
  • What additional information in the credit file would have helped prevent losses from prior A/R writeoffs?

Just going through the process of asking questions about your organization’s workflows at the various stages of the customer lifecycle is every bit as important as the answers themselves.  Carefully, deliberately thinking through the credit underwriting, customer onboarding, and collections processes, including the above issues and others, will lead to insights about your organization’s credit management processes that otherwise might be overlooked by simply using a stock form of credit application.

Step 3:  Ask For What Matters

The answers to the probing questions you ask in Step 2 will help guide the decisions of what information your organization’s credit application should ask for.  

Every industry is different.

Every business organization is different.

Perhaps most importantly, each business’s unique customer base – and each individual customer – presents a unique risk profile.  

The introspection in Step 2 is critical in assessing the data points your business may need at each phase of the customer relationship lifecycle – inception (credit underwriting), ongoing extensions of credit (review and approval), ordinary collections, distressed collections, and post-default collections.  You should finish Step 2 with a list of the information – beyond the basics – that would be useful at each lifecycle phase.

For some businesses, a straightforward one-page credit application may cover all of the bases without imposing an undue administrative burden on prospective customers.  Other businesses may need a complicated multi-step form to gather the data needed to competently make an educated credit decision.  Your assessment of your industry, business, and customer base will provide the best basis for striking an appropriate balance.

Step 4:  You’ll Never Know if You Don’t Ask

Many credit managers are reluctant to ask prospective customers for detailed financial statements.  After enough customers say no, they begin to assume every customer will say no, they just stop asking.  

But one thing is for certain:  Most customers won’t voluntarily offer any information you don’t ask for.  Your credit application should make a concerted effort to request the information – background, financial, and otherwise – that is truly relevant and helpful to making an informed credit decision.

One way to improve the response rate for documentation requests such as financial statements is to offer an online document upload portal as part of an online B2B credit application, giving your customers an easy and secure way to share documents with you.  Customizable online credit management platforms will offer the ability to flag credit applications that are missing key documents or, where appropriate, even to make certain requests mandatory.

Step 5:  Never Stop Learning

Over time, the composition and nature of your customer base, the needs of your business and your credit department, and the risks your credit department is tasked with mitigating will change.  Unlike traditional paper forms, which tend to get implemented once and never change for decades, online B2B credit management platforms offer the ability to update your credit application process in real time as your business needs change.  Electronic platforms enable you to tailor your credit application and related forms for the specific needs of your business, and even to implement customized forms and processes for different departments and business segments.

One of the key benefits of moving your B2B credit management process online is the ability to gather credit data in a single location, analyze what works and what doesn’t, and continually refine and improve your credit and collection processes over time.

Ready to Digitize Your Trade Credit Process?

Credit Workbench is the fastest and safest way to optimize your trade credit process. A modern, configurable credit application with secure e-signature and document collection will ensure that you have faster, higher-quality data during onboarding. Request a demo or start your free trial to learn how you can send your first online credit application in just 15 minutes.