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Monitoring Your Credit Portfolio: Best Practices
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Monitoring Your Credit Portfolio: Best Practices
9/25/2019
Why do you need a monitoring system, which accounts should you be monitoring, and what data should you be using?

Why do you need a monitoring system, which accounts should you be monitoring, and what data should you be using? At Cortera, we get a lot of these common questions surrounding portfolio monitoring.


Businesses typically spend most of their energy and time monitoring their largest accounts. There’s certainly merit to that, but when a company has thousands of customers, the exposure to risk increases across a much larger range of accounts. 


Now that you have hundreds or even thousands of customers spending large sums with you, it’s hard to maintain a close relationship with them all. That’s challenging enough, but what makes the stakes even higher is that over 600,000 US businesses close their doors each year. That averages down to 2,000 companies closing each day, some of which could be your customers.


Leveraging Tools to Monitor Your Entire Customer Base

An emerging best practice for monitoring your entire customer base is to break it up into two segments: individual accounts and the overall portfolio.


Leading companies are evaluating changes in every customer; large and small. They’re most likely to follow up on the alerts in different ways based on factors such as the size of the customer balance and their payment activity. Leading companies are also saving the history of alerts to support future credit decisions. Many of today’s small accounts become tomorrow’s large ones, and the alert history can provide valuable insight for that future credit risk management.


Aggregating the individual account monitoring to an overall portfolio level is also providing companies with insights that help them improve risk management. Just looking at trends and benchmarks for the largest accounts in the portfolio can be misleading. It’s not uncommon, for example, for smaller customers as a group to have a higher risk exposure than larger customers as a group. Monitoring each segment separately and against the customer base as a whole can help avoid missing negative trends while providing a more balanced and complete view of the company’s credit policy performance.


Continue on to our original blog post to find out how often you should monitor and which data sources you should use: https://www.cortera.com/blog/best-practices-monitoring-credit-portfolio

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Cortera predicts outcomes. With over 25 years in financial services, our team understands the vitality of commercial credit to economic growth.
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