Risk Management
The first step in sound credit management is
improving the evaluation of credit risks.
So, it is necessary to keep a constant look out for warning signs like shipping payments, round-number or unsigned cheques. Invoices should be correctly made out and sent as soon as possible. The pay-by date must be clear. Depending on the amount in question, a follow-up call can be made three days after posting an invoice. This can be done under the umbrella of checking that the customer is happy with the product or service. Assuming they are, it is then possible to confirm whether they have received the invoice and passed it for payment. The day an invoice becomes overdue a
company can ring the customer and politely ask if there is a problem, because payment is late. The only excuse for non-payment is not having the money. Being polite and persistent is wise. Point out that interest is now accruing on the in- voice. If the customer is local, creditors should phone in the morning and say that they will pay a visit at a specific time to collect a cheque for payment.
If the customer is too far away to visit, cred- itors should write a bland letter (no matter how much anger is felt) stating the facts only. They should draw attention to their terms and condi- tions of trade and itemise each call made chas- ing payment. They should say that they can no longer supply the customer and point out that if no receipt of a letter is made within seven days, legal action will ensue. Creditors should be pre- pared to keep their word, however. Thus, it is clear that supporting company ex- pansion while protecting critical business rela- tionships is not easy in today's business environment. One way of the improving the risk-reward ratio is through credit insurance, which is simply a way to protect against the risk of not getting paid when trading on credit pay- ment terms. Credit insurance provides the abil- ity to trade safely in both domestic and
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international markets, which can be a vital tool for well-established business. With offices in 45 countries around the
world, Atradius is the world’s most international and integrated credit insurance company. It pro- vides a range of tailored domestic and interna- tional policies and work with clients to ensure the best possible solution to credit risk management needs. Its credit cover options are supported by a first-class policy management system. Atra- dius also provides innovative business information services and a debt collection service that keeps clients fully in- formed and in control of credit management processes.
According to John Blackwell, senior communications manager at Atra- dius, “Limiting ex- posure
to risky
buyers and offering more stable buyers greater incentives to do more business could have a positive effect on cash flow and increase flexibility in expanding growth op- portunities. For instance, credit-insured receivables can improve access to bank finance, which in turn improves the com- pany’s ability to invest in distribution channels and product innovation. It also allows suppliers to offer good, reliable cus- tomers favourable credit terms that can increase sales volumes.”
New European Economy
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