Belfast Telegraph

Wednesday 23 July 2014

A tight control of credit is essential

Winning business in the current economic environment is the key goal of most companies. Fighting it out against the competition is tough, but if you can bump up the sales ledger and factor in enough profit margin then you're home and dry.

Or are you?

The survey to the left of this column highlights a problem which is often overlooked in business commentary, but which is one of the biggest drags on successful businesses around the country.

For once it's not retailers, restaurants or pubs which suffer the most from this particular issue (although yesterday's confession in this column might suggest otherwise), rather it's firms that are selling business-to-business.

Late payment has obviously become more of a problem as the downturn has worn on and probably gives one of the most accurate insights into the health of businesses.

If the latest data is anything to go by, then we've some way to go before we're back to rude health.

The spiralling level of late payments means that suppliers are being forced to act like banks, but in most cases don't get to charge the normal interest. And inevitably that means that they end up paying their suppliers late.

If ever there was a time to keep a tight control on credit it is now, and, although easier said than done, taking heed of some of the advice on these pages might help get the liquidity cycle moving again.

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