Late payments problem worsening… but a potential solution.

Last week’s survey results from Close Brothers Commercial Finance in which 20% of SMEs report that the issue of late customer payments is worse now than a year ago highlights the importance of businesses having excellent credit control practices and policies.

According to the Close survey almost 60% of those negatively affected by late payments say the situation hasn’t improved in the last year. Of those affected by late payments, almost half claim that they have had to write off up to 10% of their turnover on average in the last 12 months whilst 31% have had to write off between 10% and 25% of their turnover. Very few businesses could survive having to write-off amounts of this size.

Far more businesses fail from lack of cash flow than lack of profits. Many profitable businesses have failed through lack of proper cash flow procedures and policies. One of the most common signs of businesses where profits are less than what they should be is poor or inconsistent credit control policies. In many instances proper credit control policies are not implemented at the order acceptance stage but some token policies are haphazardly implemented at the debt collection stage. This is far too late in the chain of events to make the necessary difference if the debtor does not have the capacity or intention to pay the debt when it becomes due.
One possible solution to the whole debt collection process is to outsource it either in whole or in part. One excellent company who handles either the entire collection process or part of it is: CMO Cash Flow Fulfillment ( CMO specialise in credit control, cash flow and bad debt management services.

If the credit control and cash flow policies are run properly attention can be given to the other aspects of generating profits and cash flow such as increasing sales, identifying and rectifying unprofitable products/services and customers, sorting out funding problems, increasing productivity, re-assessing priorities and resources etc. I will deal with these in future posts.

If you need advice on any aspect of improving profits or cash flow why not give me a call.

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or contact me on 056-7761461 or 086-6488002

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