Supplier Risk

Earlier this week, I looked at the role that a Paydex score plays in the business credit-assessment process. It's a valuable tool and a great starting point for any credit risk analysis.

But it's not the only tool that you can - or should - use.

To understand why, let's take a closer look at what else goes into a complete business credit report. These are the types of things you'll learn from a source like a Dun & Bradstreet Business Information Report (BIR) - widely considered the industry standard for business credit risk-management.

• A summary that gives you an instant overview of a firm's line of business, sales, net worth, and general financial condition;
• Alerts dealing with ownership changes, bankruptcies, and other major business events;
• The Paydex Score, based on a company's payment history;
• Financial information including assets, sales, liabilities, and profits;
• Public filings such as lawsuits, liens, and judgments;
• A business history that provides insights into both the company as a whole and its key executives;
• An operations overview that covers things like what a business does, the number of employees, the location of key facilities, and known subsidiaries;
• A Payment Summary that breaks down a company's payments by industry, credit-limit histories, overdue payments, collection accounts, and a host of additional data.

In this context, a Paydex Score is a bit like a snapshot - while the additional data you'll find in a BIR is more like a three-dimensional look into a company's history, operations, and financial health.

Obviously, this kind of information is essential for making informed business credit decisions. Yet it's also a valuable tool for making other business decisions, including:

• Sales team planning;
• Marketing tactics;
• Evaluating product or marketing partnerships;
• Evaluating vendors and suppliers;
• Performing competitive research and analysis.

In other words, don't just look as business risk management as a credit question. The data you'll find in a report like a Dun & Bradstreet BIR allows you to manage risk across your organization. Just as important, it can alert you to new business opportunities long before your competitors get wind of them.

During the weeks and months ahead, we're going to share some specific tools and techniques for managing your commercial credit risk. Before we get into specifics, though, I think it's helpful to point out a few basic principles that any small business can use as a foundation for its credit risk management strategy.

There's actually a single common theme for all five of the principles I'll discuss below: act, don't react. If you want to manage risk, then you need to learn how to anticipate risk.

Fortunately, with the right risk management tools and a bit of discipline, any small business can achieve this goal. Here are five specific suggestions, including action your small business can take right away.

1. Don't just focus on new customers. It's human nature: We like to think that long-term business relationships are stable, solid, and built on a foundation of trust. The truth, however, is that up to 80 percent of bad debt involves business relationships that are a year or more old.

Takeaway: Don't treat credit risk management as a one-time process. Evaluate credit risk for your customers, vendors, and suppliers regularly, and watch for trends in business credit profiles that signal impending trouble.

2. Trust your technology tools. A manual credit-review process might feel more thorough - you can pull in data from multiple reporting sources, mull it over, and make a "big picture" credit decision. Today, however, with so many data sources to choose from, it's more likely that you'll miss or misunderstand critical information.

Takeaway: Work with a business information provider that offers a comprehensive, integrated set of risk management tools. You'll save money and time - and manage credit risk far more effectively.

3. Trust your colleagues, too! Some of a credit professional's best allies aren't in the credit department - they're in sales, support, customer service, and even the executive suite. A sales call, for example, might reveal that a customer is downsizing its office, or a business owner might hear through the grapevine that a normally reliable partner is having problems with slow payments.

Takeaway: The more eyes and ears you recruit, the more likely you are to get the information you need to evaluate credit risk in a timely manner.

4. Take business fraud seriously. Most small businesses are eager to build relationships with new customers, suppliers, vendors, and business partners. In the process, however, they're more likely to overlook signs that a business relationship is TOO promising.

Takeaway: Apply consistent risk management practices to all of your business relationships. When you see a red flag - a murky business history, unusual references, or too-good-to-be-true terms - put on the brakes until you can get the answers you need to evaluate credit risk.

5. Your job is to manage risk - not eliminate it. There's only one way to completely eliminate risk from your business, and that's to close the doors and go home. That's because the more you do to eliminate business risk exposure, the more expensive and time-consuming the process will become. At some point, the costs of eliminating ALL risk exceed the benefits of trying to do so.

Takeaway: Put the right tools, technologies, and processes into place to manage your risk in the most cost-effective manner. Once you achieve this, you can be confident that you're striking the right balance between risk and reward.

By Tom Pisello of Alinean

In order to achieve success, B2B marketers are currently using social media to better connect, dialogue and collaborate with prospects, customers, advocates/influencers and partners.

But what best practices can be used to best drive more engagements and deeper relationships?

We at Alinean recently concluded research of the Fortune 500, and select small/medium-sized businesses across a range of 31 different industries to determine what level of engagements these firms were achieving (or failing to achieve), the required investments to garner success, and the ultimate benefits these investments were yielding.

The research looked for engagement best practice, and found that marketers who implemented a layered, hierarchical set of engagement best practices, including a successive layering of Content, Campaigns, Monitoring and Collaboration, achieved superior ROI results.

Much like Maslow's Hierarchy of Needs, each successive layer of these practices, relies on a solid foundation of prior levels for success – finding those that implemented a higher level strategy without having a proper foundation achieved much less success and squandered their social media investments.

The Social Media Hierarchy of Needs is the term we have applied to these best practices, and the tiers consist of the following:

• Tier 1: Content
  
• Tier 2: Campaigns
  
• Tier 3: Monitoring
  
• Tier 4: Collaboration
  

If you don’t have anything important to say, or information of value to deliver to your community, you won’t achieve successful engagement with users. Therefore, the foundation of any social media campaign is a good content marketing strategy providing the community with value-added communications and deliverables.

Content that is most effective today includes (in priority order):

1. Value-focused including discounts, special offers, giveaways and calculators,
   
2. Entertainment including contests, games, applications, videos, music and cartoons,
   
3. Ideas such as recommendations/advice, webinars, white papers, diagnostics and articles,
   
4. Credibility including 3^rd party research reports, articles and white papers,
   
5. Personal connections, especially with celebrities, pundits, influencers and thought leaders.
   

Users won’t know that the content exists without campaigns, a promotional “push” of content via the social media channels. Campaigns involve coordinated social media communications to connect to and engage new prospects or existing customers, leveraging content as the value-add to entice and support engagement.

Some campaign examples can include: 

• Posting “deal of the day” promotions to Facebook fans,
  
• Scheduled tweets to promote a live webinar from a thought leader,
  
• Research summary tweets to promote research findings and important white paper content,
  
• Syndication of a blog post to LinkedIn Groups to gain new connections and spur discussions.
  

Above the campaigns, monitoring is required to actively listen to and dialogue with the user community. Monitoring involves sales and marketing actively participating with the community via social media channels, to reinforce and cultivate relationships with existing community members, and proactively gain new relationships with additional prospects, customers and partners.

The monitoring can include:

• Answering questions or queries about the company or products,
  
• Assuring that campaigns are achieving the expected goals, driving the right responses, reactions and results,
  
• Monitoring for positive sentiment and use for promotion to gain additional followers, or monitoring for incidents/issues and negative sentiment to help mitigate these issues and limit risks,
  
• Listening for competitive mentions or requests, engaging users who might be considering competitive solutions,
  
• Providing feedback to fine tune campaigns and content to meet user needs.
  

With so many resources available beyond employees, the most innovative companies are driving ideas, innovative improvements, and partnerships via dialogue with the social media community – a term we call Collaborative Innovation.

As opposed to the “push” oriented focus of traditional campaigns or the “pull” orientation of monitoring, collaboration is an interactive dialogue with followers, connections and fans for mutual benefit.

Collaborative Innovation is engaging with prospects and customers via social media to provide interactive ideas, reviews, feedback and input around:

Product Improvements, termed “Social Sigma” by Forrester, such as market opportunity, features and benefits, design, pricing and more, including:

• Marketing Research, replacing focus groups with social feedback to test offerings, slogans and marketing ideas, and pricing.
  
• Business Development, such as advice on go-to-market, channel or strategic partners
  
• Operational Advice, such as seeking and gathering advice on operational process improvements, procurement, and suppliers.
  
• Crowd Sourcing, using the community versus traditional providers for services or solutions, such as using the community to develop the next advertising spot.
  

Along with the hierarchical tiers, the research indicated two key additional supporting best practices, highlighting the importance of:

• Measurement of social media metrics, benefits and success, in particular tracking of engagement, influence and trends as well as success metrics such as benefits and ROI. 
  
• Integration of information, such as passing of lead information to lead nurturing systems and existing customer dialogue to CRM solutions, and processes integration, such as centralizing and coordinating social media marketing governance and resources.
  

Achieving value from social media efforts requires the user community to be attracted and engaged. To drive the most effective engagement, a set of best practices has been researched revealing a hierarchical roadmap to engagement success. Implementing each successive tier of the Social Media Hierarchy of Needs can help B2B marketers drive more marketing success and ultimately ROI from their social media efforts.

For more information and resources on Social Media ROI, please visit: http://www.alinean.com/socialmediaroi.aspx