Increased risk of defaults makes companies nervous.

We’d like to make you aware of a growing problem in business. The number of businesses in arrears is rising, and this could lead to a chain reaction. During the previous crisis, unpaid bills from debtors were the biggest cause of bankruptcies. Research by the Association of Credit Management Companies (VCMB) shows that at the time, a quarter of all bankruptcies were due to non-payment.

But where does this come from? Research by collection and bailiffs’ organization Flanderijn among more than 500 finance professionals involved in accounts receivable management shows that in as many as 24 percent of organizations, accounts receivable management is a neglected child. This is notable because at the same time more and more organizations are struggling with a growing number of customers with payment problems. As many as 40 percent of finance professionals report that their organization has seen more customers in arrears in the past year.

The growing number of customers who do not pay invoices on time has a major impact on the work of the finance professional. Over a third of them say they have been increasingly concerned with late payments from consumers or businesses for the past six months. Another 31 percent say that within their finance department, the biggest focus is now on accounts receivable management. Not all of your debtors will pay invoices cleanly (on time). There is a chance that your invoice will have to go past several stakeholders before it is made payable. Financial records may also be off the mark. Or that no money is available to pay your bill.

As a business, it is therefore important to be well prepared for and prevent late payments. A tight accounts receivable policy can prevent many problems. It can also save money to use factoring. By using factoring, you can sell your outstanding invoice and have 100% of the invoice amount in your account within 24 hours.

We’ve listed some solutions and tips for you:

  1. Check the creditworthiness of each customer before sending the agreement or order – confirmation. This can be done through Dun & Bradstreet/ Moody’s/GraydonCreditSafe
  2. Handle general delivery and payment terms
  3. Make use of general transportation conditions
  4. Have a buyer sign for receipt
  5. Invoice as soon as possible after delivery
  6. Call to buyer before invoice deadline expires
  7. Ensure a proper and conclusive dunning process
  8. Describe the procedure of accounts receivable management and ensure familiarity within the organization
  9. Set ambitious goals and actions for the organization
  10. Put every assignment in black and white so you can always find it later: a deal is a deal.

You can, of course, insure against exposure risks.

Questions about accounts receivable management, looking for advice in the process or interested in working together?

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