risk unpaid

The scenario of commercial defaults in Europe will undergo changes during 2019

The latest trends in the granting of credit of all kinds in the form of policies and lines has triggered traffic in commercial transactions by more than 15% compared to last year.

This growing trend in the volume of business experienced by companies and self-employed in our country, leads hand in hand an increase in unpaid effects as it responds to a historical trend.

Caution Extreme precautions in the credit offered to clients

As we mentioned in our previous article: Things to keep in mind before turning a bank charge to a new client, it is vital to know how to increase our sales without defaults doing so directly proportional to our business volume.

To this end, the accounting and finance departments should exercise extreme caution in granting credit to clients as well as in the maturities condemned.

risk unpaid

It should be noted that in the golden age of the global economy (back to the years 2003-2007), there were volumes of unpaid defaults to date as the cash flows that existed in those years were exorbitant and the high default ratings that occurred in those years, it was precisely because of not establishing delinquency policies within companies.   commercial defaults .

The principle of a higher billing, greater debt

Obviously, as we mentioned in the previous paragraph, there is a directly proportional relationship between billing and debt. This means that the risk of debt increases when our client base is larger.   And in the same way, we are increasing this risk when the invoices we issue to our customers are high in amount. It is the moment in which the possibility of a non-payment by bank receipt at the expiration fixed in the payment of the invoice is evaluated.

This moment of uncertainty in the collection of the balance, depending on the volume of our business, can be disastrous if the amount billed can cause a mess in our financial muscle.

Do not issue invoices at expiration that exceed 10% of our treasury

One of the most common reasons for bankruptcy is the failure to comply with this statement. Many companies and professionals have not managed to manage this situation having taken their business to ruin for a single unpaid bill that they have not been able to hold.

Example: Let’s imagine that a company has a € 30,000 box. Issuing a € 15,000 invoice to a customer at expiration is the counterpart to playing Russian roulette; We start from the basis that this company had to pay the payment to its supplier for an amount close to this invoice, which results in a high impact on the treasury of the company receive a default on this invoice, thus not being able to take care of to other payments to suppliers, which causes an accounting squeeze from which it is very difficult to leave for business continuity.  

Purpose for 2019 ?: Caution

In Cobratis we accumulate enough experience in the sector of non-payments to be able to affirm categorically that less is more. In conclusion, we can say that Discounts for early payment, separate large sales in small bills charged in installments with independent maturities and reward payments by bank transfer are just some of the accounting practices that we can use to limit the maximum risk of defaults that companies and professionals of our country will suffer in a not insignificant way during the present year 2019.

bank account

Things to keep in mind before turning a bank charge to a new customer

Bank charge to a new customer?

Often we do not know how to decide what is the appropriate payment method with our clients, although it is true that the greater the range of possibilities that we provide to our clients, the greater the facilities we will be providing to expand our portfolio.

However, it goes without saying that some types of bank charges involve a risk of default that always varies depending on the amount we are turning to the client, the history we have of this.

Offer the banking charge to a new client

This is the eternal question that gives the biggest possible headaches to the administrative and accounting departments of companies.

bank account

Obviously, the recruitment of new customers depends largely on offering more facilities and payment methods to these, so the bank charge may be the most convenient way to settle the payment of bills despite the fact that it entails a risk.

Is it advisable to offer the bank charge to a new client in the first instance?

Due to our experience in charging incidents of this type, the answer to this question is not completely clear. While it is true that there is a certain degree of distrust and uncertainty when offering this form of payment to a new client, in this way, we will also be getting a new opportunity to expand and improve our client base, which in the end They are what determine the annual volume of our business.

Select customers

If we want to avoid encountering the unpleasant surprise of a first default produced by a new client, perhaps it is a good exercise to make a first selection of those customers to whom we wish to offer this form of payment.

For this and starting from the basis that they are new customers, if we have ignorance of their trajectory as debtors or their payment behavior, we can accept something as simple as checking if this company is also host to a similar debit collection system to Cobratis Spain.

Start little by little

After the reform of the bank receipts that were established in the old notebook 19 of which we already reported in the past year 2014 (it has already rained), this new European format that was called CORE became very popular.

The basic problem that also dragged this option was that it had exactly the same limitations as its predecessor made in Spain notebook 19: TWO MONTHS TO RETURN THE RECEIPTS.

For this and that could be limited to a large extent, a system of bank charges was developed that eliminated this problem in the defaults, it was called the B2B Booklet that we also explained previously.

Although this notebook seemed to be the most appropriate to end undesirable situations of default, its lack of operation as well as the need to be regulated by a mandate that had to be signed in a handwritten form by the two parties in the bank, rest fluidity, speed and operability to the process, being the CORE format the most used and extended nowadays, despite the risks involved in its use.