Challenges and concerns that keep you awake at night

NCI recently conducted their client survey asking CFO’s and Credit Managers to relay their current concerns and challenges.

Looking at the past.

In 2016, the 3 biggest challenges were:

  1. Risk monitoring – In 2016 there were many large insolvencies that impacted on businesses, such as Arrium and Dick Smith. These were corporate entities that had been in business for many years. The experts knew these faced challenges, but many continued to support trade based on past history.
  2. Late payers – There was a significant increase in the level of overdue debts and collection actions in 2016. The NCI Trade Credit Risk Index noted significant jumps in the credit risk score during 2016 (especially in the first quarter of the year), acknowledging the heavy weight on the shoulders of credit managers to collect debts efficiently.
  3. The building sector – The building sector was the most difficult industry to collect monies from and recorded a high level of insolvencies.

Looking at the future.

So, what did clients say their biggest concerns were for 2017?

Well given the start to the year, it is no surprise that the following were their biggest:

  1. The level of insolvencies – We typically experience a higher level of insolvencies in the month of March and April. This year, it started in February and continued through at higher levels into May. NCI recorded our highest level of claim submissions in March 2017 since the height of the GFC and in our 30-year history.
  2. Collections – The ability to receive timely payments from debtors seems to be one of the biggest concerns for credit managers in 2017 and this is supported by our statistics in April and May. So, what does this mean? It shows there is stress within the marketplace on the ability for businesses to collect on time and that current business conditions remain tough for many.
  3. Customers – Or finding the ‘right’ customers and assessing them for their creditworthiness. There are many options for businesses to purchase information to support assessments for credit risk. But is now the time to revert to cheap ‘tick and flick’ assessment reports with untested scores, or ratings?

In the current environment, it may be more important to ramp up resources in the credit department to focus on the importance of customer assessments and the information you obtained to justify trade.

From my experience, it is always better to put the effort in at the front end, rather than spending hours of unproductive work in collection and legal action, or worse still, sitting at a creditors meeting trying to recover a few cents.

So what should I do?

In reviewing the hundreds of comments we received from clients in the survey, it is clear the above are challenges and concerns for many. It must be acknowledged that the level of time and effort in managing credit risk, the importance of collecting payment early and regularly monitoring risk, is as critical as it has ever been.

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