Troubled Times
TAKE A BUSINESS HEALTH CHECK, SAYS JEREMY PRIESTLEY, LEADING BUSINESS SUPPORT PRACTITIONER AND MANAGING DIRECTOR OF P&A RECEIVABLES. |
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Jeremy Priestley
Managing Director of P&A Receivables Services plc. |
From First for Business Magazine, November 2009
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Credit management is vital for small and medium sized enterprises (SMEs) in a recession and should forma critical part of any financial health check, according to a leading business support practitioner, Jeremy Priestley.
The managing director of P&A Receivables services plc urges local companies to take stock of their credit position, or risk becoming another unfortunate yet avoidable statistic of the current economic crisis.
His words come as new data reveals further indications of the ravages of the recession.
Up to one in 50 business will fail next year because of poor cash management, yet only 30 per cent of companies have chased their debts more rigorously or have sought better ways to make their customers pay up by the due date, according to latest figures.
That means no fewer than 70 per cent have failed to seek assistance in bringing in their debts. What does this prove? That many businesses understand the importance of debt collection, yet surprisingly few do anything about it.
“Cash is the lifeblood of a company and in the current climate it is not flowing easily. Companies must seek better ways of getting the money in,” said Jeremy. “It is important to remember that 40 per cent of net assets in most SMEs are tied up in unpaid invoices – and the job of getting the cash in is typically allocated to someone in the accounts department, while the management are tied down in increasing sales.
“A sobering statistic is that if you make a margin of five per cent on sales, then you only need one bad debt of £1,000 to require another £20,000 in sales to cover the loss – and everybody in the business will have to work harder just to stand still,” he added.
There is evidence that the message is getting though however and that companies are becoming alive to the need to call in their debts much faster.
In a recent survey more than 25 per cent of SMEs said they would focus on clearing debts if they had the time and resources to do it.
So now is the time for companies to act and take a critical look at the management of their cash by going back to basics.
The P&A Receivables are experts in helping companies pull in these assets and help the business thrive even in these tough times.
A credit health check conducted by P&A Receivables on your behalf can range from a complete review of your processes to a helping hand on specific issues.
Jeremy said: “In simple terms it’s about getting to know more about your customers and the person in your organisation who is chasing the debts is up to the job. It could be somebody who is not at ease in chasing customers for late payments. You should always agree payment terms before supplying goods to new and existing customers and not to forget to issue invoices promptly when goods are dispatched. Yet companies still have problems chasing payments and that is where we can advise and help”.
“In the current climate customers are taking much longer to pay – it is now more like 70 days instead of the usual 30 days, and this will put pressure on your overdraft. This may not be a problem if you have a well established business with a long track record of profit making, but if not; you may find your bank more reluctant to assist than they might have done a few years ago.”
P&A can show you how to get your money in, or perhaps help you find other sources of finance. They can show you what you need to do run your business finances better.
CONTACT
Jeremy Priestley at P&A Receivables
Kendal House, 41 Scotland Street, Sheffield S3 7BS
Tel: 0114 278 8868
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