When asked to review operating systems and
strategic plans, I find it surprising that even in these difficult economic
times many companies still adopt a lackadaisical approach to their financial
controls.
These companies
fail to recognise the need for strict discipline in respect of Stock turn and
control but what is even more disturbing in the reaction to the Debtors book.
As more and
more Customers seek actively to delay payment to Suppliers this element of business
policing is even more critical.
When a
Customer exceeds the agreed payment terms, they are in reality using the
Supplier as an alternate (unsecured overdraft). I have seen this situation
spiral out of control so that in a worst case scenario the Supplier is forced
to keep “supporting” the errant Customer for fear of realising a bad debt.
Think of the parallel to the recent Eurozone debts (Eire/Greece etc) – it is a
slippery path.
Take a long
hard look at your accounts receivable – are you happy to see 30 days drift into
60 and beyond? Have you considered the damage that is being done to your
company’s financial position?
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