One thing you can count on in business and the broader economy is that things constantly change. In 2025, the landscape appears to be shifting again. Economic uncertainty, changes in government policy, rising fraud risk, and complex supply chains make small business credit risk management more challenging.
To navigate this environment, business owners and credit managers need to adapt to these new realities.
Proactive Credit Management
Even if you have a strong foundation for your credit risk programs and policies, you’ll need to up your game in 2025 to avoid problems.
Most small business credit risk management programs focus on reviews during onboarding. That’s a good start. Business credit reports and references are crucial for determining a customer’s creditworthiness or a supplier’s financial health.
However, you need to go beyond one-time checks and forgetting about it until a problem arises. Protecting your cash flow means ongoing monitoring as part of your business credit management best practices to safeguard against sudden changes in financial health that result in late pays or defaults.
Technology and Data
Your business credit management best practices need accurate and reliable data. That may start with a business credit score analysis, but credit risk managers are increasingly adding qualitative data from online behavior, customer reviews, and industry benchmarks as part of determining risk.
Companies are also turning to AI tools like predictive analytics to get early warning signs of deteriorating financial health. When your customer is starting to show red flags, you want to address them quickly before they escalate. An early warning can help you be proactive instead of waiting for delinquencies that hurt your cash flow.
Fraud Prevention and Risk Mitigation
Fraud and business identity theft is on the rise. Recently, 80% of companies have been victims of payment fraud according to the 2024 Payments Fraud and Control Survey Report from the Association for Financial Professionals (AFP).
Regular due diligence is key, and you can’t afford to rely on outdated data. Business data “decays” at a shocking rate. According to Gartner, data decays about 70% per year, so credit data you used a year ago to check on your customers is likely dated by the time the new year rolls around. If you don’t use a continuous credit monitoring solution, you at least need to check up on your high-value customers' and suppliers’ financial health at least once a year.
Customizing Credit Policies
Another growing trend among business credit management best practices is tailoring your credit policies to specific needs.
Credit is all about balancing risk and opportunity. Depending on your financial situation, your risk tolerance will vary from time to time. For example, if you are looking for an increase in cash to expand or buy additional inventory, you might loosen up your credit policy to attract new customers. If you are worried about an economic downturn, you might tighten your policies to protect against bad debt.
Monitoring Trends in Credit Risk
With the potential for more uncertainty, businesses of all sizes will need to keep an eye on new challenges. Industry analysts are concerned about continued global instability that could disrupt supply chains further. In an increasingly global economy, this poses the potential for problems getting the goods and materials you need. Even if you source from an onshore company, it may be at risk from materials it sources overseas.
The rapid advancement of AI can be a threat and an opportunity. We’re seeing significant disruption across multiple sectors of business. In some cases, AI has created new wealth and new businesses that can be new customers. It’s also had a devastating effect on some industries and caused some companies to go from having great credit histories to potential severe risk.
In 2025, businesses will need to rethink their business credit management best practices to stay on top of emerging trends. This will be especially important for those making decisions about small business credit risk management to avoid putting their financial health at risk.
Business Credit Management Best Practices in 2025
Your success in 2025 will depend on making smart business credit decisions. Being proactive and vigilant about your customers' and suppliers' financial health is a critical concern. By adopting best practices, you can keep the cash flowing and minimize your potential losses.
Command Credit is your partner in business credit management. Learn more about how our business credit reports, ongoing credit monitoring, and business investigations can better protect your business. Contact Command Credit today.