Posts By :

Muthukumar K

How to build a world-class credit management system for your business?

Credit makes the world go around. Without this life blood of the economic system, many businesses would cease to exist.

If a company makes a sale on credit, only when the cash is collected that the sale is considered to be final and complete.

Credit department plays an important role in managing the cash conversion cycle of companies. If the sales department is the engine of a company, then credit department are its gears and oil that make the engine work.

Here are some credit practices to stay ahead of the curve:

Detailed credit policy

Does your business have a well-articulated goal for its credit department? Is it quantifiable and measurable? For instance, reducing DSO (Days Sales Outstanding) from 100 days to below 60 days is more definitive and clear than a mere generic statement of maintaining healthy portfolio of accounts receivables.

Furthermore, who takes credit responsibilities? Some companies link the bonuses of sales departments to collectability of accounts receivables to ensure sales executives are more mindful while soliciting customers. Some others put the onus of collections on the credit manager while also empowering them solely with assessment and approval of customers.

Are there credit limits and sign-off levels throughout the organization as part of risk-mitigation measures? For instance, sign-off level could be something like this:

Credit analyst – upto Rs 50 lakh of deal value

CFO – Rs 1 cr

President – Rs 5 cr

Board of Directors – Rs 10 cr and above

By having more senior employees involved in big deals, corporate can guard against potential risks and downsides.

Actively monitor customers and competitors

Recently, a south-based textile company was losing customers in certain geography. Their research found that it was losing to a single competitor which was matching its price but also giving abnormally long credit to its customers. Financial analysis of the competitor company found it to be in a precarious financial state and that it was using these desperate measures (like liberal credit) only to stay afloat. Armed with this information, the company stayed put with its pricing and as expected the competitor later filed for bankruptcy.

Cloud-based databases often give deep and critical financial information about customers, competitors as well as industry. By leveraging such data, credit managers can easily assess their credit worthiness and make informed business decisions.

In fact, many companies internally rate their existing customers based on their payment history and financial strength. By red-flagging those with a history of late payments, legal issues and bankruptcy, they reduce potential bad debts.

Organizational Buy-in

Any business credit policy needs a buy-in across the organization (including that of sales department) for it to be successful. Are the credit goals in sync with the larger goals of the organization? For instance, the company strategy might be to boost market shares. That in turn could require going down the quality curve and hunting for some difficult customers as well.

Are the credit terms flexible enough to reach out to them with ample safeguards in place? For instance, in this case, a corresponding credit term structure might insist on full prepayment for riskier customers as against the usual Net 30 days (of credit).

Clear communication of terms and payment conditions

Send invoices as soon as the orders are fulfilled and addressed to the right person. Email invoices rather than just sending it by post and ensure it is received by them by making courtesy calls. Make payments easier by accepting different forms of payment and by clearly stating out bank details.

If there are discounts for early payment, clearly spell it out. Some software facilitates automation of the entire follow-up process.


By leveraging online company data services, you can get more insight into customers and industry credit practices. Capitalize on it to keep credit risk under control.

About Probe42:

  • Probe is an independent Information Services company focused on providing financial information on Unlisted and under-covered companies in India
  • Our Customers have found value in using to enable their decisions involving Identifying prospects, sales preparation, credit and competitor analysis, etc.
  • The Probe42 platform has been extensively used by Banks and Corporates


What a data-driven sales strategy can do for your business?

Successful sales professionals tend to depend on their gut feel and natural charisma to gain a competitive advantage. Is sales prowess by itself sufficient to predict or influence customer behaviour?

Not really. It also needs the support of data today. And lots of it.

The Covid 19 pandemic has changed the marketing landscape in many ways as sales meetings, demonstrations and events went digital over the past two years.

According to a recent Mckinsey report, about 80% of B2B decision-makers prefer the digital mode of buying and don’t want to return to the pre-COVID norm either.


A sales strategy that incorporates data insights is expected to give big pay-offs in these critical sales areas:

Lead generation and qualification   

Usually, cold calling has a low success rate in soliciting prospects. But if empowered with internal and external data, lead conversion rate could be higher.

Data are of two types. For starters, the operational data that comes from your internal CRM system – be it win rates, sales cycle length, average deal size, number of contact moments and so on. This is gathered while doing sales. Collecting and structuring CRM data can provide demographic and behavioural insights about customers. If used in conjunction with external company information that exists in many shapes and forms, a holistic sales strategy could be devised.

For instance, a sales manager found from an external company database that her existing client was also a director of a prospect company. By leveraging her network, she managed to get a foot in the door of the prospect company. Furthermore, she ensured the prospect passed the necessary test of financial strength and creditworthiness before signing the deal.

Many companies have already started using lead-scoring algorithms based on detailed and granular data sets of their prospects in an area.

Talent management

Data analysis can give insights into human traits that make winners. Integrating sales performance with other information such as HR data and customer profile can help identify talent that is high-performing.

For instance, a leading construction equipment company found its market share dipping in specific districts. Data analysis showed that sales staff with civil engineering degrees had a better success rate in these areas – especially with large clients. It used the insight to focus more on technical training for its existing workforce while also hiring more civil engineers for the region.

Maximize customer value

A data-driven strategy enables offering a more personalized sales experience. For instance, using CRM you can figure out what is the likelihood of your customer buying another product of your company. For instance, a sales manager in a bank might find that a high credit card bill outstanding has a strong correlation with taking a personal loan. This in turn could help cross-sell products to existing clients.

There is a popular sales maxim – it costs 5X more to acquire a new customer than it costs to keep a current one. A good data analysis helps predict the likelihood of customer churn and take action beforehand.

How to get started?

Capitalize on internal data resources from your website and CRM platforms. Resort to data cleaning and enrich your database with external data points from specialized company data providers. Use low-cost solutions that are ready to deploy from the cloud to get started. Once you start witnessing the benefits of data analytics, invest further in data infrastructure. Sometimes, external databases need to be seamlessly integrated with existing CRM platforms for it to be valuable to the sales force and at the right time.


The ability to predict and influence customer behaviour requires more than just sales prowess. It requires loads of authentic data – internal as well as external. Leveraging it in turn can give you huge pay-offs in the long run.

About Probe42:

  • Probe is an independent Information Services company focused on providing financial information on Unlisted and under-covered companies in India
  • Our Customers have found value in using to enable their decisions involving Identifying prospects, sales preparation, credit and competitor analysis, etc.
  • The Probe42 platform has been extensively used by Banks and Corporates




Are you choosing suppliers for your business the right way?

Running a background check on prospective employees by the company HR is well-known. What about your suppliers? Vendors in many ways are an extension of your organization helping you manage work processes and assure delivery. By doing a thorough screening of suppliers, you can prevent loss of reputation or fines and lawsuits.

How do we short-list them?

Background check

Some suppliers are recommended by their existing users while others could be known from the approved list of trade associations or Government.

While embarking on a new business relationship, conduct a thorough background check. Is the supplier a legal business entity with proper licenses to perform work? Have there been any pending lawsuits or criminal convictions? Some companies shut down due to negligence or bankruptcy and reopen under a new name.

Cloud-based databases today make it possible to do such background checks of prospective suppliers remotely by downloading related reports and data.


Affordable pricing by suppliers could ultimately give a good value proposition to end customers. While competitively priced suppliers are welcome, ensure they don’t compromise on quality or service standards. Any sloppy work on the supplier part can result in incurring extra costs in the form of replacement or loss of business/reputation.

As a thumb rule, diversify your bets. What if a single supplier goes out of business or becomes complacent and lowers their delivery standard?


Faulty products or late deliveries are bound to let your customers down. Can suppliers deliver consistently on quality and at the right time? How long has it been in the business and what is its reputation? Large suppliers with a good business track record are generally reliable as they have resources and systems in place to manage contingencies. However, don’t ignore small vendors who are ‘flexible’. In their quest to succeed amidst intense competition, some are willing to take extra efforts by responding better to different requests such as rush orders or stock replacement.

An FMCG company, for instance, might be introducing a new product or doubling production to cater to increasing demand. Does the supplier have the flexibility to quickly adapt to changing business dynamics as well as emergencies?

Service Level Agreements are often built into supplier contracts where service standards, the timetable for delivery, legal and regulatory compliances and payment terms are set out. Not least, confidentiality and non-disclosure provisions, the dispute resolving mechanism as well as termination conditions.

Financial strength

Align with financially strong suppliers who could withstand business vagaries. In times of pandemic, supply chains of many companies were disrupted as their vendors went out of business. A robust balance sheet, as well as financials across multiple business cycles, would indicate that the supplier is able to withstand downturns. Check the supplier’s credit history to get a glimpse.


While technology-driven businesses need not be limited by locational constraints, others can keep supply chains local to reduce business risks. It has the potential to reduce supply chain costs, improve flexibility and contribute to the local economy. However, don’t ignore distant suppliers that are best in delivery and service.   In overseas sourcing, communication standards (including language barriers), as well as country-related risks, need to be well-understood.

Corporate ethics

Your business practices would be judged on the labour and environmental practices of your suppliers. So, if a construction company is hiring a contractor who in turn is violating labour standards prescribed by Company law, then it would be legally binding. So, while hiring a supplier, ensure their business value aligns with that of yours. Whenever possible meet them in person and check how their businesses operate.


Your supplier can make or break your business. Do thorough background checks to ensure they pass your standards of reliability, affordability and trustworthiness.

About Probe42:

  • Probe is an independent Information Services company focused on providing financial information on Unlisted and under-covered companies in India
  • Our Customers have found value in using to enable their decisions involving Identifying prospects, sales preparation, credit and competitor analysis, etc.
  • The Probe42 platform has been extensively used by Banks and Corporates



Big Threats to Auditor’s independence and their safeguard measures

Every company registered under the Companies Act has to get its accounts audited by a statutory auditor and present his views before the stakeholders every year. Auditors are professionals that are not related or connected to the company’s operations and hence their independent opinion matters to shareholders and other stakeholders.

Here are five threats that could endanger auditor’s independence:

Self-interest threat

It arises when an auditor acts in her own financial or other personal self-interest. It happens in an audit engagement when the audit firm, its partners or team members benefits materially from a financial or other interest in an audit client. For instance, a member of the audit firm might hold shares of a company and discover an irregularity in its financial statement. If she believes that such disclosure will result in a fall in its share price and thereby affect her net worth, she might refrain from making such disclosures.

There are many ways to deal with self-interest threats. One, by ensuring such members (holding shares, for instance) leaves the team or at least disposes of the shares before an engagement. If still it cannot be resolved, consider leaving the engagement altogether.

Intimidation threat

It arises when an auditor is being overtly or covertly coerced by an audit client or by another interested party. For instance, the audit firm might earn more than 30% of its audit income from a client. The client is also aware of this and threatens to discontinue the audit services if it discloses any financial irregularities.

Auditors can avoid being intimidated by sticking to their guns. By doing a thorough background check of new companies before making a pitch, such difficult engagements can be avoided. Databases that provide historical information about litigations and previous auditor’s comments can prove to be a game-changer in this exercise.

Familiarity threat

Long-time association of the auditors with the client, for instance, can create familiarity and the auditor might become sympathetic towards their actions. It could cloud objectivity and ultimately the quality of the audit report.

The Company Law to some extent addresses this issue by stipulating that no company can appoint an audit firm as an auditor for more than two terms of five consecutive years.

At the auditor level, if an audit member has any family or personal relationship with an employee of the client, either he should be removed from the team or audit engagement structured in a way so that they don’t deal directly.

Self-review threat

It refers to the threat of bias arising when an auditor audits his own work or that of his colleague. This typically happens when the auditor has provided other services other than that of audit and review of financial statements to the same client.

For instance, an audit company might provide account preparation services to a client and in the course of the audit discover financial misstatements. Since the audit company is responsible for the misstatement, it might choose to ignore it.

Self-review threat can be avoided by having separate teams for audit and other services. If that is not possible, consider relinquishing the engagement.

Advocacy threat

It arises when an auditor also acts as an advocate for (or against) an audit client’s position or opinion by representing them. For example, a company might hire its auditor to represent them in court for a dispute with a buyer. In this circumstance, the auditor is an advocate for the client and therefore might refrain from disclosing financial misstatements.

Auditors can safeguard against this threat by segregating their team for each task or by choosing between representing or audit engagement.


Having separate teams can solve many threats relating to conflict of interest while a thorough historical background check avoids pitfalls relating to intimidation and other ethical issues.

About Probe42:

  • Probe is an independent Information Services company focused on providing financial information on Unlisted and under-covered companies in India
  • Our Customers have found value in using to enable their decisions involving Identifying prospects, sales preparation, credit and competitor analysis, etc.
  • The Probe42 platform has been extensively used by Banks and Corporates



What makes for a great valuation analyst?

Valuation analysts on the buy and sell side operate in an extremely competitive environment. While financial prowess and extensive research skills are part of the basic skill sets needed to execute their job, there are certain traits that make them stand out from the rest.

Here are six of them:

  1. Focus

Many of the successful analysts have vast years of experience in a niche area. For instance, some track the oil market or auto industry for decades. In this setup, they typically focus on a small set of companies and their business models. By keeping track of development and trends over a period of time, they eventually gain a deep understanding of the industry and become experts.

Often, there is less time in hand to react – making sharp focus the need of the hour.

  1. Turn data into useful information

It’s the age of information explosion. Every minute, all sorts of news reach you through various sources of media. It is important to filter them and absorb only the relevant ones. Otherwise, there is the risk of analysts gathering all sorts of data and not reaching any conclusion.

Moreover, some critical information can be a game-changer. For instance, access to details about acquisitions of unlisted companies. Being unlisted, information about their financials and business performance is not in the public domain.

However, some specialized databases capture data of such unlisted companies from the registrar of companies. Access to PAS-3 information, in turn, gives details about allotment of shares or securities of an unlisted entity within a month.

A successful analyst digs deeper into such extra information that is relevant and useful in his decision-making.

  1. Independent thinking

Herd mentality abounds in the stock market – perhaps out of fear of someone becoming the odd man (or woman) out. So, seldom there is independent thinking and the analysts play it safe by keeping their view in line with that of the majority.

However, the great analysts work on their conviction which in turn comes from deep insight into the stock or industry trends. With great clarity in their minds, they are willing to stand alone, if need be, in their conclusions. This trait really separates the men from the boys.

  1. Creative

How do you value a company with little historical data of performance or guess the growth trajectory of a new-age industry? Often, there are few data points available to value companies and that’s where right-brain thinking helps. Shrewd analysts search for the closest peer or data trends to connect the dots.

  1. Compelling communication

While incisive analysis makes for a good analyst, equally important is to communicate the findings in a clear and concise way to clients. Jargon-filled reports or complicated graphics can make it difficult to get the message across. So, the need of the hour is to communicate in a simple language sans jargon while being coherent in arguments.

  1. Learning from mistakes

The market is a great teacher. It teaches a lot day in and day out for those willing to learn. For instance, a wrong decision made on impulse costs a fortune while doing nothing often pays off especially if you are in for the long haul.

Similarly, a wrong assumption upsets an entire financial model. Analysts, therefore, need to have the ears to the ground and review past decisions and mistakes. A great analyst is seldom fixated on his views and is a constant learner.


A successful analyst uses relevant and cutting-edge data to his advantage. By being open and flexible, she strives to make decisions purely on data-backed conviction rather than following the herd.

About Probe42:

  • Probe is an independent Information Services company focused on providing financial information on Unlisted and under-covered companies in India
  • Our Customers have found value in using to enable their decisions involving Identifying prospects, sales preparation, credit and competitor analysis, etc.
  • The Probe42 platform has been extensively used by Banks and Corporates