Prevention is better than cure! How can KYC help?

In credit management, the golden rule of “prevention is better than cure” applies. Estimating the risk of late or non-payment is of great importance. To calculate this risk you need to know your customer. The principle of ´Know Your Customer` (KYC) can help with this.

Know Your Customer, also known as Customer Due Diligence, is a term mostly used in the banking world. If you agree to a financial collaboration with a public or private company, it is important to determine the possible risks. This could be done by thorough screenings. But, you cannot just ask for all information, often the financial situation is confidential. To guard this privacy, strict rules are involved. Yet, there are many possibilities to map risks. We will guide you through these with our expertise.

Credit Management & KYC

To avoid the risk of late- or non-payment, you have to be able to estimate your customers. Preferably in as many fields as possible. It is best if you know the answers to general questions like:

• Who is my customer?
• Who are the owners, managers and directors?
• Where is my customer located?
• Contact information: how can I communicate and with who?
• Where is the customer dealing? Also abroad?
• Who is their final target?
• Is there growth potential or are there struggles?
• Is there an overtake going on?
• …

The most important thing within credit management is the financial position of the customer. To determine this, you have multiple options.

Financial risk analysis

You can do the screening yourself. Much (financial) data is stated online. Think about the ´Kruispuntbank` for Enterprises (KBO) or the National Bank of Belgium (NBB). With help of the liability, solvency, and profitability ratios, you provide a certain score or rate. This provides an estimate of the possible risks. These ratios are only applicable to professional customers. A risk analysis for a private corporation is more difficult because the information is not publicy known.

Support with risk analysis

A screening does take a lot of expertise and knowledge. Is this not within your skillset? No problem, you could appeal to trading information. That is where different providers create reports and ratings, like Graydon-Credit Safe, Company web, Trends, Dun & Bradstreet, …

You want to create a very extensive screening for big and small companies. Many appeal to a credit analyst.

Want to implement KYC into your organization, or in need of help from a credit management professional?