Credit Control Case Studies
Supporting Customers in the Recession
One of my clients sent a big order for Christmas 2008, which took the credit limit with the customer to the limit. Now, this customer was supplying to pubs, and we know how they’ve been hurt in the recession…no surprises then when the customer couldn’t get paid by those pubs in January 2009. My client was left with two options at that point: 1) insist on terms, meaning their customer goes out of business; 2) go for an alternative.
As I suggested, my client agreed a payment plan for the customer, continue to supply, but on proforma terms, and a bit off the older invoices each time…months down the line, the plan continues to work, the balance on the older invoices continues to reduce, and the customer continues to trade.
So what has the client got from it? Months of trade – and so profit – they would not have had otherwise and…invaluable customer service and loyalty…what would that be worth in today’s climate?
Credit Control as a financing tool
A client in the manufacturing sector secured a major extension on a supply contract, which would increase turnover by more than 20% in a year. Normally this sort of growth would need to funded by using external finance (loans, overdraft, etc) which would have cost thousands of pounds. Through careful cashflow management, and consistently focused credit control activity the client was able to pay for the entire process…additional stock, packaging, labour etc…without ANY external financing… which saved them thousands of pounds in overdraft/finance costs, so increasing profitability. Whether you save hundreds of pounds, or even thousands, being able to fund growth internally improves your profitability…
Reduce your overdue sales ledger, and Bad Debt
In the time I was involved with this bigger client, I reduced 120+day overdue from over £600,000… to £3,000 (which was being repaid on a payment plan), the total overdue value dropped from £2.4M… to £400,000 (of which £370,000 was promised). Bad debt was in the region of £10,000 through a two year period, while their total turnover was approx £35-45M for the same period…what does all this mean? A much healthier balance in the business bank account…and a better profit margin, because the cost of credit is reduced…
For more information about how we can help you call Geoff on: 01978 800390 or email info@urecall.co.uk
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