How we helped improve customer payment habits
A client contacted us through its invoice finance lender for support in improving customer payment habits and credit management procedures. Our objective was to enhance visibility and control of future collections.
The client was commercially sound and trading well, but encountered difficulties when realising its sales ledger, which was beginning to cause liquidity problems.
We quickly arranged an initial meeting with the management team to truly understand the operational issues. We then undertook a high-level review of the client’s sales ledger, its systems and procedures to determine where problems lay and how best we could develop and implement a debt recovery strategy to overcome them.
Key issues that we identified
Our extensive ledger review identified that:
– Invoices outside terms exceeded 60% in gross sales ledger value
– End column debt exceeded of 30% of sales ledger value
What we recommended
In response to our meetings and ledger review findings, our proposal included:
– Providing an outsourced collections exercise to recover overdue accounts
– Increasing resource within the credit control team
– Introducing proactive collection services
– Undertaking regular board level reviews of Days Sales Outstanding (DSO) and key debtors
– Introducing an experienced credit manager to the existing team
The results we secured
By implementing these measures, we managed to secure the following improvements for the client:
– The implementation of a sales ledger management strategy saw debt outside of terms reduced to just 10%
– Funding availability has increased due to reduced financial exposure
– The implementation of proactive credit control process that has resulted in the prompt resolution of disputes
– The introduction of monthly board level reporting for transparency and visibility
In quick conclusion
This receivables management strategy that we developed and implemented exceeded the client brief and objectives and resulted in a significant improvement of the client’s credit management controls – reducing its overdue invoices, which previously totalled over £1million. All in all, we added real value to the business – considerably enhancing our client’s cash flow and keeping it profitable.