--- name: customer-credit-management description: Manage end-to-end customer credit including credit applications, limit setting, ongoing monitoring, collections coordination, and credit insurance. Use when onboarding customers with credit terms, managing credit holds, negotiating payment terms, coordinating with collections on delinquent accounts, or managing credit insurance policies. Triggers on phrases like "customer credit", "credit terms", "credit hold", "payment terms negotiation", "credit application", "credit limit increase", "delinquent account", "credit insurance", "accounts receivable risk", "customer payment ability". --- # Customer Credit Management Govern the full lifecycle of customer credit — from application and approval through ongoing monitoring, collections coordination, and risk mitigation. ## Workflow 1. **Receive credit application**: Capture customer information through standardized application form during sales onboarding or when existing customers request higher limits. 2. **Collect supporting documentation**: Obtain financial statements, bank references, trade references, and any guarantees or collateral documentation. 3. **Run credit check**: Pull credit bureau reports, check for public records (liens, judgments, bankruptcies), and review payment history through tools like D&B Paydex. 4. **Score and rate**: Apply internal credit scoring model to assign a risk grade and recommend initial credit limit and payment terms. 5. **Route for approval**: Send credit decision through approval workflow based on limit amount and risk grade (see approval matrix). 6. **Communicate decision**: Notify customer and sales team of credit approval, limit, and terms; or communicate denial with alternative payment options. 7. **Enforce limits in systems**: Load credit limit and terms into ERP; configure automatic credit holds at threshold breaches. 8. **Monitor ongoing**: Track payment behavior, utilization rates, and early warning signals; trigger reviews when conditions change. 9. **Coordinate with collections**: Escalate delinquent accounts to collections with full credit file; coordinate on payment plans and recovery strategies. 10. **Review and adjust**: Conduct periodic credit reviews; adjust limits up or down based on payment performance and financial changes. ## Credit Application Process ``` NEW CUSTOMER CREDIT APPLICATION WORKFLOW: 1. SALES TEAM SUBMITS: • Customer legal name, tax ID, business address • Authorized signatory name and title • Requested credit limit and payment terms • Expected monthly order volume • Industry and company size 2. DOCUMENTATION REQUIRED: Tier 1 — Credit Limit ≤ $25,000: [ ] Completed credit application [ ] D&B number (if available) Tier 2 — Credit Limit $25,001 – $100,000: [ ] All Tier 1 items [ ] Most recent financial statements (P&L + Balance Sheet) [ ] 2 trade references [ ] Bank reference Tier 3 — Credit Limit > $100,000: [ ] All Tier 2 items [ ] 12-month bank statements [ ] Corporate resolution authorizing signatory [ ] Parent company guarantee (if subsidiary) [ ] D&B credit report (paid) 3. CREDIT ANALYSIS (Target: 2 business days): • Run credit bureau check • Score using internal model • Assess industry risk • Check for concentration risk (related to existing customers) • Prepare credit memo with recommendation 4. APPROVAL (Target: 1 business day): • Based on approval matrix (see below) • Approver reviews credit memo and supporting documents • Decision: Approve (at recommended or different terms), Decline, or Request more info 5. COMMUNICATION: • Approval: Email customer + notify sales team + load into ERP • Decline: Email customer with reason + suggest alternatives (COD, LC, credit insurance) • SLA: Total process < 5 business days for Tier 1, < 10 business days for Tier 3 ``` ## Credit Approval Matrix | Credit Limit | Grade A/B | Grade C | Grade D/E | |-------------|-----------|---------|-----------| | ≤ $25,000 | Credit Analyst | Credit Manager | Credit Manager + Sales VP | | $25K–$100K | Credit Manager | Credit Director | Credit Director + CFO | | $100K–$500K | Credit Director | Credit Director + CFO | Decline (unless special approval) | | > $500K | CFO + Credit Director | CFO + CEO | Decline | ## Credit Hold Management ``` CREDIT HOLD — WHEN AND HOW: AUTO-TRIGGERED HOLDS: ────────────────────── 1. Balance exceeds credit limit → Hold at 110% of limit 2. Invoice > 31 days past due → Auto-hold on all new orders 3. Customer payment method declined → Hold pending resolution 4. Bankruptcy/insolvency alert from credit bureau → Immediate hold MANUAL HOLDS: ───────────────── 1. Credit manager discretion (deteriorating financials, negative news) 2. Sales team request (customer requested temporarily) 3. Legal hold (dispute or litigation involving customer) 4. Audit hold (internal audit review in progress) HOLD COMMUNICATION: ────────────────── 1. System flags order as "Credit Hold" — cannot proceed to fulfillment 2. Sales team receives notification with reason 3. Sales team contacts customer to resolve 4. Resolution options: a) Customer pays down balance below limit → Auto-release b) Customer makes partial payment → Manual release with remaining on hold c) Credit limit increase approved → Auto-release d) Payment plan agreed → Conditional release (ship against payment plan compliance) e) Customer provides letter of credit → Release against LC value HOLD TRACKING: ────────────── • Log every hold: date, reason, duration, resolution • Report monthly: number of holds, avg hold duration, revenue impact • Target: < 2% of orders impacted by credit hold • Alert: If hold duration > 14 days, escalate to Credit Director + Sales VP ``` ## Credit Limit Increase Process ``` CREDIT LIMIT INCREASE — STANDARD PROCESS: 1. REQUEST: • Initiated by sales team or customer request • Current utilization, payment history, and reason for increase documented 2. ELIGIBILITY CHECK: ✓ Minimum 3 months on current terms ✓ No invoices > 15 days past due in last 6 months ✓ Payment history: ≥ 90% on-time in trailing 12 months ✓ No active credit holds 3. REVIEW: • Credit analyst reviews payment trends and financial updates • Calculate new recommended limit: Current monthly order value × risk multiplier • Check concentration limits (single customer < 10% of total AR) 4. INCREASE FORMULA: • First increase (after 3 months): +25% of current limit • Subsequent increases (annually): +25–50% based on performance • Exceptional increase: Requires full credit re-evaluation with updated financials 5. APPROVAL: • Same matrix as initial credit approval (based on new limit amount) 6. DENIAL OF INCREASE: • Communicate reason to sales team • Suggest actions customer can take to qualify (improve payment speed, provide financials) • Re-evaluate after 3 months if conditions improve ``` ## Integration with Collections ``` CREDIT ↔ COLLECTIONS HANDOFF: WHEN CREDIT HANDS OFF TO COLLECTIONS: • Invoice reaches 16 days past due → Collections begins soft contact • Invoice reaches 31 days past due → Credit places hold + Collections escalates • Invoice reaches 45 days past due → Collections engages formal process • Invoice reaches 90+ days past due → Collections evaluates write-off or agency referral INFORMATION SHARED: • Credit file (score, limit, terms, financials) • Payment history (pattern, average days, disputes) • Account contact information and decision-maker details • Any known financial difficulties or restructuring • Credit insurance coverage status WHEN COLLECTIONS REPORTS BACK TO CREDIT: • Payment plan agreed → Credit adjusts monitoring • Account confirmed uncollectible → Credit recommends write-off • Customer financials significantly deteriorated → Credit triggers limit review • Account fully recovered → Credit may recommend limit restoration JOINT DECISIONS: • Whether to maintain shipping relationship on payment plan • Whether to reduce limit vs. maintain and monitor • Whether to refer to external collections agency • Whether to pursue legal action ``` ## Credit Insurance Management ``` CREDIT INSURANCE — PROTECTING AGAINST BAD DEBT: WHEN TO USE CREDIT INSURANCE: • Customer in high-risk country or industry • Large concentration with single customer (>10% of AR) • New customer with limited financial history • Export sales to unfamiliar markets • Required by lenders as covenant condition COVERAGE OPTIONS: Policy Type Coverage Premium Best For ────────────────────────────────────────────────────────────── Whole Turnover 90-95% 0.2-0.8% of sales Large portfolios, full coverage Selected Account 90-95% 0.3-1.0% of sales Individual high-risk accounts Political Risk 85-95% 0.5-2.0% of sales Export to unstable regions CLAIMS PROCESS: 1. Report potential loss to insurer within 30 days of payment default 2. Provide: invoices, delivery proof, collection efforts documented 3. Insurer investigates (typically 30-90 days) 4. Claim approved → Receive payment (minus deductible) 5. Insurer may pursue recovery from customer (subrogation) LIMITS AND EXCLUSIONS: • Per-buyer limit: Maximum coverage per customer (negotiated) • Waiting period: Claims not covered within first X months of policy • Exclusions: Disputes over quality/delivery, related-party transactions • Deductible: Typically 10-20% of claim amount ``` ## Edge Cases - **Strategic accounts with weak credit**: Key customers critical to revenue but with poor credit profile; consider parent guarantee, LC, or credit insurance rather than reducing terms and losing the account - **Customer requesting emergency credit increase**: Rush process with expedited checks (D&B report same day, sales manager attestation); apply temporary increase with 30-day expiry - **Customer in financial restructuring**: Don't place blanket hold if customer is under Chapter 11 automatic stay (illegal); consult legal; assess whether account is deemed "critical vendor" in restructuring - **Affiliate network**: Multiple companies under same parent; evaluate consolidated group strength but track each entity separately; cross-default clauses may apply - **Customer disputes as credit weapon**: Customer who files disputes to delay payment and trigger credit holds on competitors; flag pattern, require prepayment - **Seasonal businesses**: Credit needs fluctuate dramatically; pre-approve seasonal limit increase with automatic expiry ## Output ### Credit Management Report ``` CUSTOMER CREDIT MANAGEMENT REPORT — January 2025 ================================================== CREDIT ACTIVITY: New applications processed: 28 Credit limit increases approved: 15 Credit limit decreases: 3 Credit holds placed: 12 Credit holds released: 10 Applications declined: 5 PORTFOLIO HEALTH: Total accounts: 342 On credit terms: 310 (90.6%) COD/prepay only: 32 (9.4%) Avg days sales outstanding: 42 days (improved from 45 last month) % AR > 30 days past due: 4.2% (improved from 5.8%) % AR > 60 days past due: 1.1% (improved from 1.8%) % AR > 90 days past due: 0.3% (improved from 0.6%) RECENT CREDIT ACTIONS: Date Customer Action Details ────────────────────────────────────────────────────────────── Jan 3 MegaCorp Inc Limit Increase $1.0M → $1.5M (Grade A, 14 months on-time) Jan 5 StartupXYZ Limit Decrease $620K → $310K (Grade C→D, declining orders) Jan 8 GlobalTech Ltd Credit Hold Invoice #4521 — 35 days past due ($48K) Jan 10 RetailCo Limit Increase $200K → $250K (improved payment pattern) Jan 12 NewVenture Co Application Declined Insufficient financials, no references Jan 15 ManuParts Inc Hold Released Paid $180K, balance now within limit CREDIT INSURANCE STATUS: Active policy: Euler Hermes — Whole Turnover Coverage: 95% of insured losses Insured exposure: $10.2M (82% of total AR) Uninsured accounts: 60 (mostly Grade A, domestic) Claims filed (YTD): 1 — $22,000 (pending approval) RECOMMENDATIONS: 1. Review StartupXYZ — consider credit insurance or require LC for future orders 2. Increase limits for 8 Grade A accounts at >85% utilization 3. Initiate full credit review for 12 accounts approaching annual review date 4. Evaluate credit insurance coverage for 3 new international customers ``` ## Integration Points - ERP (NetSuite, SAP, Oracle): Credit limit enforcement, hold management, AR data - Credit bureaus (D&B, Experian, Equifax): Credit scores, reports, alerts - CRM (Salesforce): Customer data, sales pipeline, account manager assignments - Credit insurance platforms (Euler Hermes, Atradius): Policy management, claim filing - Collections platforms (HighRadius, Collecto): Handoff, recovery tracking - Document management: Credit applications, financial statements, guarantees - BI tools: Credit portfolio dashboards, concentration analysis, aging reports - E-signature (DocuSign): Credit application execution, guarantee documents