‘They’ll pay me, I’m sure, they’re too big to go bust’…
The catastrophic collapse of Carillion has led to fingers being pointed in every direction to apportion blame. However we at Corp & Comm take a different approach. The key issue here is what we can learn from the debacle.
To be frank, the failing has been on the cards for a while, the indicators were there, they just weren’t taken notice of.
In a recent survey, Sage claimed that over 80% of businesses had suffered some form of late payment, with a staggering 9% of business simply writing off the debt. When pushed on these findings in a recent interview on BBC Breakfast, Sage UK MD Alan Laing believed it may well be because the perception is pursuing debts was too expensive.
Let us provide you some free advice that you can incorporate into your existing credit control procedures so that you can best make use of credit indicators to ensure you don’t suffer at the hands of ‘the next Carillion.’
1. Review your credit limits. Are your customers above the agreed rates ?
- You’ve agreed credit limits. If you’re now supplying more and still not being paid, this is an indicator that the debtor may be over-trading, as they’re doing more business but not generating cash-flow to pay debts.
2. Do your diligence. When did you last credit check your customers ?
- Carillion informed ‘The City’ of a profit warning but yet continued to be supplied. Any adverse profit/credit information shows either a downturn in trading or a change in the financial workings of the debtor. Either serve as a warning.
3. Have a plan. Review your method of recovering your monies ?
- Carillion’s creditors may have had the mind-set that they can’t go bust, they’re too big. This is clearly not true. No matter whom the debtor is, you have to treat them all equally. They’re still a debtor, irrespective of whether they owe you more. Don’t be scared to ask for it before it’s too late !
Unbeknown to Alan Laing, pursuing debts does not need to be expensive. In fact our clients state we’re very cost effective. Indeed, we often give things away for free just for the fun of it !
Take a look at our 10 Commandments for Successful Credit Control for everyday actions you can take to improve Credit Control and Cashflow.