Late payments cost firms €4bn, conference hears

LATE payments are costing Irish companies up to €4 billion, according to the Irish Institute of Credit Management (IICM).

The institute said companies were failing to take full advantage of the profit potential of credit management.

It also called on organisations to take credit management out of the closet and make it a core business competence.

Credit management expert and trainer Abe ‘WalkingBear’ Sanchez told the Irish Institute of Credit Management seminar in Dublin yesterday that with a change of attitude and a focus on the actual product value, Irish companies could turn riskier customers into a 900% increase in pre-tax profits on the sale.

Mr WalkingBear advocates an approach that differs from the traditional model of credit management, the conference heard.

Most companies, he said, use a 1950s-style model and tend to turn down riskier credit sales for fear of bad debts and because that is the way such sales were historically handled.

However, this approach fails to consider the potential impact on pre-tax profits and ignores variable and fixed costs of sales.

In the 21st century environment with limited scarcities of most products in the developed world, competitive companies cannot afford to turn down sales and lost customers, the conference heard.

As such, credit management should be at the centre of every boardroom discussion and credit managers should be viewed and valued based on their contribution to sales and overall profitability.

Also speaking at the seminar was IICM chief executive Declan Flood. The IICM is the body which invited Mr WalkingBear to speak in Ireland.

Mr Flood said: “Credit Management in Ireland is evolving but we need to pay greater attention to it. In Britain, it is estimated that businesses spent £12bn (€17.5bn) on credit management last year.

“Bad debts in Ireland can run at about 0.5%, but the real issue is the cost of late payments and we estimate that the cost of late payments in Ireland is €4bn.”