If you’re looking to get 2015 off to a good start for your business and its financial prosperity, then a New Year’s Resolution to minimise your risk profile could be a good place to begin.
Tinubu Square, a provider of credit risk software solutions, has produced a six-step approach to financial risk that could form the core of your New Year’s Resolution for 2015.
First, get your outstanding debts under control; they probably amount to around a third of your total balance sheet, and a tighter grip on credit control and chasing overdue payments could bring this down.
Next, make sure this approach is adopted as widespread company culture; staff from the sales team to the invoicing team should all be engaged with your new payment processes.
Third, choose your customers carefully. It might be tempting to work with anyone you can get, but if they can’t pay you, it’s a waste of time and money.
Fourth – and an extension of the above – make sure you continually credit-check your existing customers too, so you can respond to any rising risk profiles.
Fifth, consider a credit insurance policy, which effectively outsources all of your debt to the insurer (in many cases, it might be simpler and just as effective to outsource your debt recovery function instead).
And finally, keep close control over your export activities, so you are able to spot and respond to any outside factors that raise your risk.
If you make these your New Year’s Resolutions for 2015, you won’t be alone; Tinubu Square cite a recent PwC/DFCG study which found over 42% of CFOs have decided to implement new criteria for monitoring performance, including adopting new credit risk management tools.
The same study found 58% of CFOs want the finance department to be more involved with transformation and their company’s decision-making processes, a further indication that credit control is becoming an issue recognised across entire companies, rather than just in the board room.