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Managing Risks: Origination Workflow

Today’s blog continues our series on maximizing the effectiveness of in-house financing, by controlling factors influencing your returns.

As we discussed last week, a proactive approach pays dividends in terms of preventing soft defaults from turning into hard defaults. This week we’ll examine how a practice can employ smart origination practices; proactively evaluating patient profiles at the beginning of the process and hopefully identifying those patients most likely to stay on track.

An important factor in successful origination workflow is uniformity. The process must always start with the same basic steps; each person that walks in the door must be treated the same. This not only makes the entire process easier to track and manage, it also protects the practice in case of legal action if the payment plan is not approved.

A good starting point is running simple credit, banking, and fraud checks for every potential candidate, with minimum thresholds for each. The right automated software can take care of this with a few button-clicks, and keep a record throughout. This gives a simple picture of the risk profile, and in a super-conservative system, these thresholds can be treated as hard criteria for approval. However, in light of the current credit crisis and drops in average credit scores nation-wide, these numbers may not paint an entirely accurate picture.

For this reason, it may be prudent for a practice to add a subjective element to the process, while still following a uniform procedure. This can be achieved by appointing an administrator with the power to override the above criteria and modify the process, who is responsible for making the final decision.

This can be as simple as asking a few questions to see if someone is trustworthy, following up on references, or asking for a co-signer. While this may sound invasive at first glance, keep in mind that those with lower credit are most likely accustomed to this process with other sources of credit.

Based on the risk assessment, the administrator can make the final call to approve or deny, or modify the loan to account for added risk — for example, adjusting the down payment or interest rate.

By following these steps, any small business can create a uniform evaluation process that is fair for the customer and protects the business.  The right software can automate everything, allowing for efficiency and accountability with minimal upkeep.

Next week, we’ll take a closer look at tools that can be used to further evaluate individual profiles and proactively prevent defaults.

By |2017-01-18T17:30:51+00:008:20 am|Comments Off on Managing Risks: Origination Workflow