If you extend credit to your customers you are effectively providing finance to them for the credit period.
If your business does not have the cashflow to support the credit it has extended you could be just one bad debt away from insolvency.
The Daily and Sunday Telegraph have launched a series of articles reporting on late payments - and on the battle lines being drawn by those affected by and involved in settling overdue invoices.
In a Daily Telegraph report, for instance, Steve Sutherland - owner of architectural glazing specialist Dortech - is described as "putting his tin hat on" amid fears of a backlash from customers after he called time on a 13-year relationship with construction brand Balfour Beatty.
Credit Insurance can be a valuable tool in a company’s credit control armoury and recent years have seen an explosion in availability of different types of cover.
From traditional Whole Turnover to Catastrophe or Single and Multi Buyer cover brokers can now offer a variety of policies to suit most businesses.
Will I get the money my company is owed?
But to answer this question first we need to understand exactly what is meant by the term insolvency, Sid Home our resident Credit Management expert explains.
Small firms in Ireland are waiting an average of 62 days for their invoices to be settled, but when it comes to debt collection Ireland's entrepreneurs are still reluctant to take action.
These are the findings of the Small Firms Association's Late Payment Survey, published in early January, which looks at the issues affecting the credit control and debt recovery Ireland's small businesses use to keep their accounts - and their non-paying customers - in check.
Insolvency turns £4.7bn of non-payers into never-payers
Each year, £4.7 billion of unpaid invoices in the UK are simply wiped away by insolvency and winding-up procedures, according to an Experian report.
From the smallest 'micro firms' to the biggest brands, when a company leaves the market completely by going out of business, the rest of the supply chain is likely to feel at least some impact not just in terms of lost custom, but by going unpaid for work already done.
When it comes to cashflow, it isn’t just about ensuring your invoices are paid on time. It encompasses the entire flow of money in and out of your business and covers your businesses dealings with your own suppliers.
So do you treat your suppliers as you would like to be treated?
Invoicing is an integral part of every business, so taking the time to ensure that your paperwork really works for you is often a wise investment.
In part three of the Managing Cashflow guides from the ICM and BIS you can find a wealth of useful information to help your company avoid the common invoicing pitfalls, reduce delays and remove excuses for non-payment.
A Christmas Collection
The payment was late: to begin with. There is no doubt whatever about that. This must be distinctly understood, or nothing wonderful can come of this story I am going to relate.
Once upon a time - of all the good days in the year, on Christmas Eve - old Scrooge sat busy counting his unpaid invoices.
After ensuring your company really knows your customer, knowing when you can expect your invoices to be paid is the next step in an effective credit control process.
Agreeing payment terms in advance helps to ensure both parties accept and understand their obligations and allows for the creditor to forecast the arrival of funds, a key survival strategy in today’s turbulent economy.