Credit Manager, fight late payments with collection software?
The Credit Manager, responsible for optimizing receivables, plays a key role in reducing late payments. Is it important to combat late payment? Why and how?
Every credit manager has heard it at least once: “Time is money”. All late payments are lost earnings. According toANCR, in 2019, 56 billion euros of receivables remained unpaid in France, equivalent to around 2% of GDP, even before covid. The problem of late customer payments is now applicable to all companies. If everyone pays according to the LME, Law n°2008-776 of August 4, 2008 on the modernization of the economy, we’ll be able to see an increase of 12 billion in cash flow for companies.
How can you reduce late payments? This is the number 1 challenge facing credit managers today. According to the November 2019 AFDCC survey, 74% of credit managers have a variable salary indexed to an individual target. The credit manager has become the key figure in the company’s drive to optimize trade receivables. Yet, according to INSEE, there are only 3,000 credit managers in France, compared with 145,800 SMEs and ETIs and 287 large corporations.
The
cash culture
is at the heart of the discussions. The objectives defined by management converge: to reduce WCR, increase ROI effectively and rapidly improve sales. At a time of
digital transformation
it’s finally possible to meet these challenges. France seemed to be on the right track. According toAltaresIn 2019, 33% of companies paid their invoices on time. Today, the figure is 43.4%, i.e. almost one in two. Only covid has had a major negative impact.The subject of late payment is of particular concern to SMEs, and many articles have been devoted to it.. However, small businesses are the most affected by this problem. A Plum* study carried out for Sage shows that 40% of SMEs surveyed explain that late payment has a direct impact on their business.
Why are you always faced with late payments?
The main problem is the administrative management of customer invoices. This means resolving a non-conforming invoice, such as an error in the amount, address, etc.e or telephone number… Disputes are not to be taken lightly. Processing times are often too long, and some of these invoices are never paid at all. The figures are significant, and 1 in 3 companies today goes bankrupt because of late payment.
5 good reasons to reduce late payments
In its study, ANCR estimates that compliance with payment deadlines would free up 12 billion euros a year in cash flow.
A company cannot grow its business and be competitive if its working capital requirements are too high. It is therefore essential to be able to recover customer outstandings to finance your own business and improve your competitiveness in the market. Digital intervention in optimizing credit managers’ debt collection is therefore justified. What’s more, this is of particular concern to SMEs, which often don’t have the resources to manage these late payments.
1- A source of financing that’s free , or almost free , compared with the average cost of financing a company or the expected return on equity.
2- Avoiding non-payments: in 2017, non-payments amounted to 2% of GDP, i.e. 56 billion in 2017, and 25% of SME bankruptcies are linked to a lack of liquidity.
3- Improve WCR and cash flow: by reducing late payments, the credit manager reduces DSO, and therefore WCR, and frees up cash flow. This additional cash can be used to finance growth and keep the company competitive. For example: financing working capital requirements, financing digital transformation, international expansion, external growth.
4- Obtain more financing at lower cost , thanks to healthier financial indicators and additional cash freed up by customer receivables.
5- Finance the regulatory compliance of the supplier item (DPO) with the LME. The credit manager must also ensure that working capital is optimized in order to increase the company’s activity. So there are several ways to optimize working capital and finance growth. For example, to finance working capital requirements during a recovery.
How can credit managers combat late payment?
The Credit Manager benefits from a political context favoring the reduction of payment times. Firstly, the Loi de Modernisation de l’Economie (LME), introduced in 2008 and revised in 2015, has reduced late payments by 1 day a year. Penalties can reach up to 2 million euros. Following the example of the UK, the practice of “Name and Shame” is beginning to emerge in France, enabling companies with poor payment habits to be publicly denounced.
Digitization and access to artificial intelligence, the cloud and big data now make it possible to optimize business and anticipate problems. The arrival of new management and performance tools continues to grow. Robotization and new technologies to avoid late payment are therefore the order of the day.
How can Aston iTF help Credit Managers?
The
credit manager
now has a role to play as a business partner. To increase efficiency, it is essential for credit managers to digitize their tools so that information is updated automatically. Platforms specialized in receivables visibility and collection, such as
ASTON ITF
are solutions not to be overlooked.
SaaS collection software offers a number of important features: 1) performance analysis and dashboards 2) analysis of customer risk and scoring of customer payment behavior 3) automated dunning and collection 4) Dispute tracking and collaborative workflow 5) digital assistant to simplify credit insurance and factoring management
The benefits for the company and the credit manager are clear: a 50% reduction in late payments, and at least 80% of automated collection tasks. In conclusion,
these solutions
for credit managers resulted in a 20% increase in cash collection. Not only are they more efficient, they also save time. This will enable you to focus on more strategic issues, generate more revenue and improve your working capital..
Read more :
A collection software solution? 5 reasons and 5 questions
Why digitize the Order To Cash process?
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