Years on from the crunch - and despite Government initiatives and some small signs of economic recovery - it remains difficult for SMEs to borrow funds in order to continue trading or expand operations. It's therefore obviously very important that SMEs make credit management a core business activity, and learn about and use professional credit management techniques and systems so as to improve cash flow, reduce exposure to late payment and bad debt, and cut back on the need to borrow.
Attitudes and techniques that were appropriate, and which worked well in the past, need to be adapted if they are to work well now. The current economic climate demands a more imaginative, flexible, patient approach to collection, better communication and mediation skills, and a greater willingness to use information technology, negotiate, compromise, and look to long term goals rather than short term gains.
Negotiation - Less Can Be More
Now is not the time to insist on immediate settlement, make unrealistic demands or take inappropriate action - or to place too much reliance on the Court system. All settlement offers - including lesser sums offered in full and final settlement of larger debts - need to be considered carefully, because even if proposals fail and instalments cease within a few months they are still likely to offer a better return than anything that might be achieved as a result of issuing legal proceedings.
Issuing Legal Proceedings
The days when overdue accounts were automatically passed out to Solicitors for collection once in-house collection procedures had failed to result in settlement are gone - probably forever. Legal proceedings obviously remain an option if a proposal falls to the ground, but they should only be considered where there is a reasonable chance of recovery; Court fees for debt proceedings are now prohibitively expensive and there is no point in throwing good money after bad. The Register of Judgments, Orders and Fines, The Individual Insolvency Register and any one or more of the many available debtor registers can enable SMEs to find out more about a debtor's situation before deciding to issue proceedings that might be doomed to failure. Checking these registers should be as automatic as getting a credit report on a potential (or potentially defaulting!) customer.
Insolvent or Deceased Customers - Don't Give Up on Getting Some Kind of Return
If a debtor proves to be - or becomes - insolvent, one should not assume that to be the end of the matter, or consider that the debt is no longer worth pursuing. Insolvency is on the increase, so following up on any correspondence received in respect of insolvent customers and registering claims for potential dividends should form part of the everyday collection process. Dealing with insolvency is time-consuming and complicated; in the past it often did not get dealt with at all, and the debt was simply written off. That no longer remains an option; pennies in the pound are better than no pennies at all.
Following a death, creditors can often successfully recover an outstanding debt from the beneficiary’s estate. These may include large balances of consumer debt.
Adequate staff training, membership of a Trade Credit Circle and up-to-date professionally prepared basic credit documentation are important credit management tools. These tools, too, were often neglected or ignored in the safer, warmer economic past - or just pushed to the bottom of a long list of things someone intended to do tomorrow - but that no longer remains an option either, because the protection they offer is something every SME needs today.
Spending on education, information and documentation is spending to save. Sound, up-to-date, professionally prepared documentation is an important safeguard against potential customer failure; access to the sort of reliable 'inside information' that can be gained through membership of a Trade Credit Circle can make it easier for credit personnel and senior management to make good judgement calls as to whether to begin or continue to trade with a particular customer and on what terms, and training in communication skills and stress and anger management for all credit personnel and senior management can avoid a lot of expensive and distruptive absenteeism.
What We Can Do To Help
We can take over when SMEs run out of experience, options, or time.
Metliss Barfield offers a range of flexible, cost effective outsourcing options that enable SMEs to choose the services they need when they need them, and enjoy the security of a quality support team with no on-going financial commitment. We can deal with difficult or disputed accounts, ensure that documentation is as failsafe as possible, and take on the burden of dealing with Insolvency Practitioners. We can administer a Trade Credit Circle - or find or create a suitable one. We can advise on credit systems, design Credit Policies, train personnel to cope and communicate better, and generally make life more productive and profitable for a Company and more fulfilling and enjoyable for its staff.
Find out more about us and what we can do to help you over the coming year by exploring our site. If you need more information, please don't hesitate to contact us.