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

225 Pages·2010·4.35 MB·English
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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? 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