Essential and Effective Credit Management in the current recession

The harsh reality of economic life is that it’s becoming harder to be paid on time. With UK businesses taking an average of 51 days to pay invoices (that’s an average figure, some take a great deal longer) companies need a clear debt management strategy in order to secure payments owed to them.

According to recent research conducted by BACS Payment Schemes, UK SME’s are owed £25.9bn. This represents close to a 40% increase on the figures published 12 months ago!

The speed and depth of the credit crunch has caught out a lot of businesses and they are ill-prepared to cope with the issue of late payments with the majority of banks being reluctant to increase, albeit temporarily overdraft limits.

With credit lines being more costly and harder to obtain, automating the collection process through the use of Direct Debit collections backed up by professional credit control can be one of the most cost-effective ways of improving cashflow and reducing outstanding payments.

Feedback from our own customer base indicates that where they collect outstanding payments via the FCC “Direct Debit Service” they remain in control of the cashflow situation with no deterioration in DSO (days sales outstanding) For those clients that also utilise our “Collect” credit control service, prompt action can be taken to manage the whole sales ledger process including following up and reinstating Direct Debit instructions if appropriate.

Almost a fifth of all companies now employ someone specifically to chase overdue invoices and with the recession biting harder, all businesses will need to examine and place greater focus on improving cashflow from their existing client base.

It’s fair to say that some poorly managed businesses would have failed in any event and the current economic situation has purely accelerated their demise but the survival and growth of well managed professional businesses will no doubt have a robust and solid Credit Management system in place.

In summary, if you want to have an even chance of not only surviving but thriving, make sure you are one of the latter and not the former.