The Business Guide to Credit Management: Advice and solutions for cash-flow control, financial risk and debt management (Business Guides)

225 Pages·2010·4.35 MB·English

by  Jonathan Reuvid

i n
the business guide to
Credit
Management
n ii
thE businEss guidE to
Cash in
on our
Credit
experience.
Management
Advice and solutions for
cash-flow control, financial
risk and debt management
Making change happen is one thing;
making it stick is quite another.
Many businesses have made cash Consultant Editor:
their focus, but maintaining results
depends on management leading Jonathan Reuvid
and embedding behaviours across
the entire business.
Talk to us about how to maintain
cash behaviours, and how we can
help you stay ahead.
Visit us now at pwc.co.uk/rmg
RECOMMENDED BY
INSTITUTE OF DI RECTORS
© 2010 PricewaterhouseCoopers LLP. All rights reserved. ‘PricewaterhouseCoopers’ refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the
context requires, the PricewaterhouseCoopers global network or other member frms of the network, each of which is a separate and independent legal entity.
24801.indd 1 15/02/2010 14:20:45
iii n
thE businEss guidE to
Credit
Management
Advice and solutions for
cash-flow control, financial
risk and debt management
Consultant Editor:
Jonathan Reuvid
RECOMMENDED BY
INSTITUTE OF DI RECTORS
n iv
This book has been endorsed by the Institute of Directors.
The endorsement is given to selected Kogan Page books which the IoD recognizes as being of
specifc interest to its members and providing them with up-to-date, informative and practical
resources for creating business success. Kogan Page books endorsed by the IoD represent the most
authoritative guidance available on a wide range of subjects including management, fnance, market-
ing, training and HR.
The views expressed in this book are those of the authors and are not necessarily the same as those
of the Institute of Directors.
Publisher’s note
Every possible effort has been made to ensure that the information contained in this book is accurate at the
time of going to press, and the publishers and authors cannot accept responsibility for any errors or
omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or
refraining from action, as a result of the material in this publication can be accepted by the editor, the
publisher or any of the authors.
First published in Great Britain and the United States in 2010 by Kogan Page Limited
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted
under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or
transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the
case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries
concerning reproduction outside these terms should be sent to the publishers at the undermentioned
addresses:
120 Pentonville Road 525 South 4th Street, #241 4737/23 Ansari Road
London N1 9JN Philadelphia PA 19147 Daryaganj
United Kingdom USA New Delhi 110002
www.koganpage.com India
© Kogan Page, Jonathan Reuvid and individual contributors, 2010
The right of Kogan Page, Jonathan Reuvid and individual contributors to be identifed as the authors of this
work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
ISBN 978 0 7494 5978 9
E-ISBN 978 0 7494 5979 6
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Reuvid, Jonathan.
The business guide to credit management : advice and solutions for cost control, fnancial risk
management and capital protection / Jonathan Reuvid. – 1st ed.
p. cm.
ISBN 978-0-7494-5978-9 – ISBN 978-0-7494-5979-6 1. Credit–Management. 2. Cost control. 3. Risk
management. I. Title.
HG3751.R48 2010
658.8'8–dc22
2010005213
Typeset by Saxon Graphics Ltd, Derby
Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall
v n
n vi
vii n
Contents
List of Contributors xvi
Foreword by Miles Templeman, he Institute of Directors xxi
Preface by Philip King, The Institute of Credit Management xxiii
Introduction 1
Jonathan Reuvid
Part 1: Back to basics 3
1.1 Keeping control of your cash fow 5
Ross McFarlane, RBS Invoice Finance
1. Approve new customers 6; 2. Fund invoiced sale 6; 3. Collect
invoices and credit control 7; 4. Protect from insolvency and bad
debts 7; 5. Management information and constant attention 7
1.2 Do you have the courage to establish cash-generating behaviours in
your business? 12
Niall Cooter, PricewaterhouseCoopers
What does good look like? 12; What behaviours do we see in
underperforming companies? 13; Where do these undesirable
behaviours come from? 14; How do we change behaviour? 14;
What are we hoping to see from this change? 16; Do you have
the courage to make change happen? 17
1.3 National debt (business to business) UK 19
Graham D Sands, Amril Limited
Cash fow and its importance 19; Credit control 20; Personal
relationships 21; The roles of staff and management 22; Payment
practices 23
n viii Contents
1.4 Paying on time is good for business – the prompt
payment code 26
Philip King, The Institute of Credit Management
Part 2 Improving cash fow 31
2.1 Preventing slow payments: do not suffer in silence 33
Martin Williams, Graydon UK Ltd
General principles 34; How to improve cash collection 34;
Summary 37
2.2 Bill payment by direct credit – the importance of accurate
referencing 39
Peter Finlayson, UK Payments Administration
Introduction 39; Bill payments 40; Best practice guidelines 43;
Next steps 46; Note 46
2.3 The search for solid ground – outsourcing to stabilize your
debt management performance 48
Mike Purvis, Transcom Worldwide (UK)
Introduction 48; A unique bind 50; Managing customers or
pursuing debt 51; Analysing the risk 51; Building fexibility 52;
Buy ‘results’ 52
2.4 The collections industry 55
George Miles, Paladin Commercial Credit Management
Introduction 55; The collections industry 56; Debt sale and
purchase 56; Invoice discounting 57; The collectors 57;
Petition 58; Collectability Index 59; Conclusion 60
2.5 An introduction to debt sale and purchase 62
Joyce Newman, Lowell Group
The benefts of debt sale 63; Market development 63; The sale
process 64; Optimizing collections 65; Regulation and treating
customers fairly 65; The future 66
Part 3 Innovation and success in managing credit 69
3.1 Proactive credit management is key for successful customer
relationships and business continuity 71
Maarten de Wild, OnGuard Credit Management Software
The role of credit management 72; The reasons for failure 72;
Proftable credit management 72; What priorities are required:
eight tips 73; Conclusion 80
ix n
Need a
helping
hand?
Trace a debtors new address, debt collection,
employment status reports & pre-sue reports
Visit us at www.traceadebt.com
for more information or call 01273 621705
19792_COL HP AD.indd 1 05/03/2010 12:12:44
Traceadebt.com is powered by Vilcol, one of the
UK’s leading trace & debt recovery companies.
Vilcol operate the broadest range of debt collection & credit management services
across every type and size of business.
PREMIER SUPPORT SERVICE - for credit control departments
Vilcol offer a premier support service for credit control departments in the corporate
market place. Incorporated in 1988 Vilcol has been in business for twenty one years.
Their debt recovery and investigations rank in the top 10 of over 800 agencies in
the UK. That has put approximately £12 billion a year back into the hands of the
rightful owners companies. This helps to ensure other people’s jobs, in effect a vital
component in the engine room of the economy.
Vilcol partners with organisations to recover their overdue accounts and bad debt
according to the client’s own criteria. One of the most successful new methods of
chasing payment is to incorporate that goal within a customer care approach. This
worked at Vilcol and reduced our late payers by 20% straight away. Telephoning to
confi rm prompt delivery and the quality of your product establishes early the nature
advertisement feature