ERP SOS – Credit Exposure Impacting Cash flow and Bad Debt


The escalating challenge posed by mounting bad debts underscores the necessity for conducting comprehensive credit risk analysis for every customer seeking credit-based transactions.


Credit management isn’t just about collecting money from customers or making timely payments; it’s also about lowering risk. The most important reason for implementing a credit management program is to protect your company from financial damages. Poor credit control promotes bad debt and causes financial strain, which again can have detrimental effects on your company.


Proactive Measures: Predicting and Mitigating Risks

Accurate prediction in credit control is key to mitigating potential risks and preventing late payments. Businesses can take proactive measures to ensure they are aware of potential issues and can address them before they become problems. Some ways to predict and prevent late payments by using and ERP include:


  • Implement a credit policy : B2B companies require a firm credit policy to ensure their continued growth. Before offering credit to new customers, companies should conduct a thorough credit history and business reference check. Document the terms of business and the credit limits, and initiate business only when your customers understand, accept, and sign the business terms.


  • Avoid pricing disputes : Customers are more likely to pay you on time when you provide them with the right information on documents and invoices. Disputes can create bad debts that can significantly impact the business.


  • Provide multiple payment options : One of the simplest hacks for getting paid outstanding invoices paid quickly is to add a multitude of payment options (credit card, bank transfer, cheques) – to enabling debt financing solutions – where your customers can get the outstanding invoices financed and pay you while they manage the repayments.


  • Implement AR automation : Accounts Receivables automation modernizes the accounts receivables process through automatic electronic systems that decrease repetitive and time-consuming tasks. It frees up time for your accounts receivables team to chase payment and get the cash in to mitigate bad debts rather than wasting time on printing and posting invoices.


  • Confirmation of delivery : Strengthen your delivery systems and implement the practice of keeping signed dockets as proof of delivery. When you automate the AR process, sending invoices ahead of time becomes possible, discouraging customers from making late payments. It can also send automatic reminders when customers deviate from your trade terms.


  • Review credit limits of your customers : Review the credit limits of your customers regularly. Look out for warning signals which could indicate that they may be facing financial problems. Check on all customers, even the long-standing ones, to monitor changes in buying habits or an increasing level of debt.


In the dynamic, often challenging landscape of the trading industry, leveraging advanced tools like ERP systems can make a substantial difference in your profitability. As competition intensifies and the market continues to evolve, the question isn’t whether you can afford to implement an ERP system, but whether you can afford not to.


About ACEteK – SAP Business One ERP System Partner

We’re an SAP Partner, with a long standing track record of successful SAP Business One ERP System Software projects, delivered on time and on budget. The ACEteK team has established its reputation, and differentiated itself from its competitors, by offering all its clients expert knowledge and advice, combined with a friendly, personal and attentive service.


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