When asked
to review operating systems, I find it surprising that even in these difficult
economic times many companies continue to adopt a laissez faire 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 “trading” with the errant Customer for fear of realising a bad debt.
Think of the parallel to the ongoing EU debt problems – 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? What damage is being done to your company’s financial position?
Ask
yourself “who is taking advantage of us?”
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