A strong cash flow is the life blood of all businesses.
Poor debtor control leading to poor cash flow is a key contributor to small business failures.
Alternatively, excellence in managing debtors provides the cheapest and best source of increasing cash to grow your business.
Please don’t accept bad debts as a constant business expense. Trying to judge when customers are in payment trouble is a major part of maintaining cash flow. Watch for warning signs – for example, if a customer suddenly starts paying 45 – 60 days late, then this is a red flag moment. You need to investigate why ASAP.
Sales & Credit Teams
The power of Sales and Credit working in tandem to grow and protect what is typically the company’s single largest asset – debtors, cannot be under estimated. The alternative of working independently in ‘silos’ risks poor credit assessment decisions leading to increased risk of slow payments or default.
Credit Trading Terms
Management of trading terms is a Sales function, not a Credit function, driven by gross margin profit earnt from Sales’ negotiations with individual customers around price, volumes, product quality et cetera. High margins allow flexibility of extending terms, low margins require tight terms to ensure the sale remains profitable.
Reduce Credit Risk, Increase Profits, Increase Cash to Grow
Is giving your customers interest free, unsecured loans.
Time is Money
Collecting money from debtors more quickly provides cash at a faster rate to grow a business or retire debt.
Agreed with your customers – why then do so many companies allow their customers to significantly s-t-r-e-t-c-h contractually agreed terms?
Lack of Cash
There is nothing more important than getting paid for your product or service given many businesses fail through lack of cash despite making profits.
Erode profits, and if you don’t manage debtors they will begin to manage you, gradually taking away your flexibility to manage your business.
Days Sales Outstanding
A correct financial measure of your business’ investment in credit sales, but NOT the correct measure of your Credit team’s performance if trading terms are varied.
Did You Know…
In a recent survey, respondents identified the greatest challenges to small business profitability as follows:
Maintaining adequate cash flow
Outstanding invoice collection
Bank lending restrictions
(Source: Atradius Payment Practices Barometer – November 2014)
At a 5% net margin – to replace a bad debt, you need to find 20 times the value in new sales.
SEVERAL WORDS ABOUT US
Tony’s approach to Strategic management of Accounts receivable was well ahead of its time and a methodology that I have taken with me to new roles. As a leader, Tony’s ability to empower his direct reports was second to none and I have grown under his mentorship that has seen me grow into other roles and into the leader I am today.
National Credit Manager
Tony is an experienced senior executive who appreciates and understands all the issues associated with credit management and is focused on results. He works well with all stakeholders, business management, staff and clients.
Non - Executive Director
During my career in Finance and Credit Management I have seldom encountered a manager as supportive and inspirational. Tony has a natural ability to motivate staff and develop them into high performing individuals. He is strategic in his thinking and has unparalleled knowledge and experience in credit management.