Despite
many warnings and scares many companies are still failing to adopt a robust
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 is the
reaction to the debtors’ book.
As more and more customers seek actively to delay payment 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).
If left unchecked this situation can
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.
Without a vigilant approach it will not be unusual for payment terms of
30 days drifting into 60 and beyond. The implications for your company’s
financial position is all too obvious.
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