Services

Cash Flow Management

In order to grow or maintain solvency, cash flow management should be a business priority.  By improving the credit control process a company can retain the level of liquidity to survive.

By ensuring you are carrying out credit risk analysis together with a collection strategy you will be able to efficiently maintain your cash flow.

Maintaining good business records, profit and loss, cash flow analysis, aged debt and aged creditor reports will assist you to assess your company’s health.  A cash flow forecast can be prepared in advance and will help you to monitor possible short comings ahead of time and thus action can be taken.  These figures can be compared to the actual numbers giving a real time view of the current situation.

Collection Strategy

It is important to ensure the credit management has a good working relationship with all departments involved in the sale to include customer relations, logistics and sales.

By using a collection strategy you are implementing a number of basic rules which should include:

Ensuring sales/marketing/Finance all understand the importance of prompt payment

All departments need to understand and adhere to the company’s terms and condition of sale

All documentation involved in the sale clearly shows the price and terms of payment (which must be agreed prior to the sale).

All potential customers (and going forward existing customers) should be regularly credit checked.  This is now common practice and should not come as a surprise.  With larger sums involved management accounts can be requested to assist with credit granting decisions as appropriate.

A clear format for dealing with late payments and potential bad debts should be agreed and supported by management.

Credit Risk Analysis

Every bad debt begins as an agreement to extend credit.  Therefore, if we can calculate the perceived risk and effectively manage the account thereafter, we can reduce the possibility of non-payment.

Time and effort spend gaining knowledge about your customer before the sale will give confidence on their ability to pay.  There should be a thorough analysis and investigation, raising many questions to be answered before you tie up valuable resources for little or no reward.

When companies progress from little credit management to an effective management of their sales ledger a number of myths are unveiled.

• Not all customers are creditworthy;
• Future sales figures may not cover todays bad debt
• Very overdue customers may never make a payment
• The customer is not always right.

In order to make good credit decisions there are a number of steps you can follow to gain valuable information.  This due diligence will in turn provide evidence to confirm your decision making process.

Debt Investigation

If you have accounts in arrears there is a potential for bad debt.  It is important to establish why the payment is not forthcoming.  Invariably, the problem may be easy to solve but without establishing a relationship with your customer in the early stages this can make the situation more difficult.

Late payment can be due to a number of reasons and cash collection is inextricably linked to understanding what those reasons are and how to deal with them.  Is non-payment linked to an inability to pay or is it due to inefficiency by one or both parties?  Either way, each need to be dealt with differently.

Query resolution will always play an important part in the collection process and can be the cause of many delinquent payers.  If invoice queries not acted on quickly, damage can also be done to the customer relationship. Queries may also highlight problems with products and/or departments within your own business so must be taken seriously.