Documentation & Guides

# Frequently Asked Questions

# What is CreditRisk

Questions:

# What is the best way of describing the CreditRisk system?


The CreditRisk system combines the entire credit management cycle from the application and vetting stage to the Book management stage and allows everyone from an organization to participate in the management of your entire business credit cycle, in a transparent and interactive manner.

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# Application Length?

Questions:

# Isn’t the CreditRisk application too long and detailed? I am concerned that it will scare off any prospective customers


No. It must be remembered that the credit application is the basis of any new business relationship. As the legal process is expensive and drawn-out, we feel that trade creditors should not solely reply on the legal process to enable them to recover bad debts.

It is therefore imperative that trade creditors have a transparent and well defined system to ensure that the data supplied by an applicant is detailed enough to make an informed decision regarding the risk of commencing a business relationship with a new potential customer.

At least 80% of the data fields of the CreditRisk version of the credit application is interpreted and secured, thereby giving an indication of risk of engaging into a business relationship with an applicant.

If a credit applicant objects to completing and thereby suppling you with all the relevant information as set out in the credit application, it will, after all, deny you the opportunity of properly assessing the merits of the application.

One of the major benefits of the CreditRisk credit application is the fact that it substantially speeds up the credit application and assessment process, thereby enabling a trade creditor to make an informed decision regarding the basis (if any) on which a business relationship should be formed.

# Scoring System Benefit

Questions:

# What other benefits does the CreditRisk credit application scoring system have?***


  • Apart from the speeding up of the credit vetting process, it also accepts a credit grantor through the somewhat intimidating and time consuming process of assessing the risk in a clear, structured and transparent manner.

  • It also allows for the storage of credit applications in an easily assessable format.

  • It restricts the type of credit bureau in formation by merely only allowing for the extraction of the core information necessary to make an informed decision.

  • It creates a structure for enabling management to easily assess the CreditRisk decisions made when the account was opened.

  • It ensures that all authorized employees approach the credit vetting process in a consistent manner, thereby eliminating any lack of objectivity. It however does not allow for the active participation of an authorized employee, (even on a more junior) level) to follow a considered approach and proven process in a consistent and transparent manner.

  • It makes it easier to explain the basis on which a credit application has been rejected to a potential customer.

  • It assists an entire organization to actively participate in the managing of your Book, your single biggest business asset.

# Source of Bureau Reports

Question

# Will I be able to receive the same benefit from the CreditRisk credit application process if I am dependent on another credit bureau for reports?


No. Users linked to other credit bureaus will not be able to use the automated scoring process. All users should be able to secure all relevant information from any other credit bureau report in order to answer all the questions posed in the manual scoring process, which also forms part of part two of the CreditRisk credit application scoring process.

# Scoring Guideline

Question

# What percentage score has to be achieved before I should consider approving a credit application?


This depends entirely on the CreditRisk appetite of a credit grantor. In some cases it has happened that a very respectable credit applicant has achieved a negative score under phase two of the CreditRisk scoring process as a result of one of the applicant’s directors having had a small, relatively, harmless default reflected against his personal credit profile.

The CreditRisk scoring process certainly however highlights any aspects that warrant scrutiny. Some of our clients have even, based on their existing credit and collection policies, in some cases only utilized certain of the phases (specifically phase two which is the Credit Bureau Report phase) independently of the other two phases for credit applications where lower credit limits have been requested.

Recommend

We however recommend that all three scoring phases should be utilized when vetting an applicant.

# Types of Businesses

Question

# Can all types of businesses use the CreditRisk credit application?


Yes, any business that sells goods or renders services on credit will benefit from using the CreditRisk System. The CreditRisk System can be used by any business, large or small in any type of industry, including logistical, and transport companies as well as companies in the pharmaceutical industry as we have catered for specific clauses which apply to these two industries.

# Trading Terms and Conditions

Question

# The CreditRisk credit application does not include our trading terms and conditions. Is that not a problem?


No, you will note that we do incorporate your trading terms and conditions as part of the CreditRisk credit application by referring to it. The suggested opening of an account confirmation email, which is automatically sent to an approved applicant when the account is opened, also again stresses that all subsequent transactions will be strictly subject to your own trading terms and conditions.

# Deed of Suretyship

Question

# Is the Deed of Suretyship as contained in the CreditRisk credit application acceptable in law although it is not contained in a separate document?


Yes, as we have separately highlighted and framed the relevant section as a deed of suretyship. You will also note that we have required the surety to sign the deed of suretyship separately.

# Unsigned Credit Application

Question

# Do I need the original credit application or is the receipt of the completed but unsigned CreditRisk credit application acceptable in a Court of law?


The completed but unsigned CreditRisk credit application is perfectly acceptable as sufficient proof of the basis of the commencement of a business relationship between the parties, subject to the fact that the completed credit application has to come from a secure site address of the applicant. The Electronic Communications and Transactions Act (opens new window) supports this view.

However, the normal rules relating to the formation of a contract apply; this Act only provides for a method of affixing a signature. So for instance, the person sending the email must have both the intention and the authority to contract.

The exception to the person being required to have the intention and authority to contract relates to the situation where that person creates the impression with the recipient of the email that he or she is authorized and has the requisite intention to contract.

To remove any doubt, you could insist that a signatory if he or she is not a director/member of the company/close corporation provide a Resolution to confirm that he/she is authorized to sign applications on behalf of the applicant.

Although the speedy return of the completed, but unsigned credit application shall certainly speed up the credit vetting process to commence a trading relationship, it is advisable to also secure at least a signed scanned copy of the completed and signed application.

Again, the best documentary evidence shall always be the original, completed and signed credit application, but as we all know, this does not always happen in the real business world of trade creditors.

You, will, in any event, need a scanned copy of the completed credit application to check whether the deed of suretyship was signed by the surety.

The system also makes provision for the signing of the application by way of a digital signature. All digital signatures are fully certified.

# National Credit Act

Question

# CreditRisk credit application makes reference to some of the provisions of the National Credit Act. Do the provisions of the National Credit Act apply to all our transactions?


No, as the transactions of trade creditors generally fall under the ambit of the definition of an “incidental credit agreement” as defined in the National Credit Act.

This means that only transactions concluded with an enterprise where its combined asset value or annual turnover is less than R 1 million, will be subject to the provisions of the National Credit Act.

In order to minimise any queries regarding this aspect at a later stage by the applicant or the Courts, we have made provision for the applicant to confirm this aspect.

In cases where the applicant has indicated that its annual turnover or combined asset value is less than R 1 million, we suggest that further information be secured and considered regarding the applicant’s future capacity to service the debt, before approving such an applicant.

# Consumer Protection Act

Question

# Will the provisions of the Consumer Protection Act or the Amendment to the Companies Act have any bearing on the applicability of the CreditRisk credit application?


No. Most trade creditors all contractually exclude most forms of liability relating to the product or services supplied, by dealing with such aspects in their trading terms and conditions.

As far as the amendments to the Companies Act are concerned, the fact that the amendments do make provision for the principle of rescuing a business, certainly makes the CreditRisk vetting system and scorecard even more relevant than ever before.

If a business is under business rescue, it means that any legal action against such an enterprise will be suspended during the business rescue process. It is unfortunate that in many instances, such businesses under business rescue end up being liquidated.

# Credit Insurers

Question

# Our company’s book is already insured by one of the credit insurers. I, therefore, don’t think that your CreditRisk system will have any benefit for us. Am I correct in saying this?


This assumption is not true.

As our mission statement says, the CreditRisk system supports a holistic approach to credit risk management.

This means that in conjunction with the ultimate safety net that credit insurance offers, the CreditRisk System and scoring system still servs as a very important tool to assist businesses to manage their credit risk effectively.

Apart from the fact that the CreditRisk application scoring process certainly will create a far greater awareness, consistency and transparency the credit assessment procedures to be followed by your staff, it must be remembered that some of your book debts might not be covered by the credit insurance policy.

The structure, thoroughness and transparency provided by the CreditRisk System, should however also have a positive impact on your monthly premiums.

# Applicant User Profile

Question

# Why do we have to give a separate temporary username and password to an applicant when asking such a person to complete the online application?


Security breaches and internet fraud are unfortunately a common feature of doing business online these days. It is therefore imperative that a unique username and password linked to an email address of designated representative of a targeted applicant is enforced.

# How long does a credit application take

Question

# How long does a credit application take to vet?

The CreditRisk vetting process takes about 15 minutes. It essentially consists of three phases, two of which are scored almost immediately. The third phase requires the participation of a person from your organization by prompting him/her to do 12 checks, which should not take much longer than 15 minutes.

# Incorrect Application

Question

# What do I do if the wrong type of application has been completed and submitted by an applicant?


You should really send the applicant a new application to complete. If you are concerned that this will delay the approval process, then rather (if a sole proprietor/ application had been completed instead of a company version) order a credit bureau report for the company ( if you have the registration number) by going to the credit bureau reports tab.

# Understanding Scorecard

Question

# How does the CreditRisk scorecard work?


The CreditRisk scorecard is based on measuring over 40 different data streams derived from the credit application, a comprehensive credit bureau report, as well as the structured feedback, received from a representative from your organization when completing a check list.

Additional elements such as feedback from your sales representatives may also act as a further guide to the CreditRisk score given.

# Bank Codes

Question

# How does the Creditvision for a Business score to replace bank codes work?


When clicking on the button to order a bank code, you will find a summary as provided by Transunion Credit Bureau of the C4B report made available by them to replace bank codes. You will note that on the second page of the brochure, a breakdown is given of the risk profile based on whether the subject is a small to medium size business or a large one. The score is made up by, amongst other things, taking into account the risk profile of the principals of the enterprise as well as that of the enterprise itself.

We are of the firm view that bank codes are no longer that relevant. It is also a fact that the majority of banks no longer make bank codes available. It is for that reason that other tools such as the CreditRisk system to assist businesses have become even more important.

# Convert A Cash Account

Question

# Can I upgrade a cash customer to a credit term customer?


The shorter cash application version provided by CreditRisk contains, amongst other things, consent from a cash applicant to allow you to credit vet such a customer by obtaining credit bureau reports.

It also contains an acceptance by the cash customer of your trading terms and conditions. This means that you will be in a better position should you wish to consider upgrading a cash customer to at least perform a credit bureau check before making the decision to change the status of such a customer.

Should the credit bureau report be favourable, you will then be in a better position to engage with such a customer, when prompting them to complete a new credit application.