A prospect of the tools which are becoming necessary to guarantee
healthy business cashflow
The predictions are that 2010 is going to be a year of slow and difficult growth. The Word Bank estimates that the global GDP - which in 2008 was still growing by 5.8% whilst in 2009 had shrunk to 2.1% - in 2010 will not risk above 2.3%, together with the potential of an explosion in cross-border unpaid debt. This serves once again to emphasise the most disruptive phenomenon of the economic and financial crisis;
the uncertainty of being paid. Yet again, the financial crisis has put under the spotlight the shortcircuit which connects the real economy and finance: companies which have business which is still essentially profitable, risk going out of business due to slow or
non-payment (according to Dunn & Bradstreet in the first quarter of 2009, the average delay in payment times – expressed as a departure from timescales agreed) in Italy was 20 days as against the 13 days recorded up to 2007.
The percentage of medium-to-large companies which have a 15-day delay in payment now amply exceeds 50%, whilst the punctual payers are less than 10%. Being able to claw-back these payments which have ‘run aground’ can mean the difference between life and death for otherwise healthy companies. For Credit Management companies, this should be an ideal moment, because the market is seeing steady growth.
But is that how things really are? A spokesman for Comas, the
commercial information company &
debt recovery company which was founded in 1976 in Arezzo (near Florence), commented. “There is no doubt that work is increasing. The requirement for
credit management in 2009 has increased by 20% in comparison with 2008.
debt recovery, there is no doubt that market demand is increasing, and I think that the annual increase has been about 50%. However, you have to bear in mind that difficulties in collection have similarly increased.”
debt recovery becoming more difficult? “partially, this is a phenomenon which is connected with the crisis just as is the question of demand; this would not have happened had economic conditions not worsened and therefore the capacity of the other side to honour their obligations. But companies tend to hand over their bad debts for
collection when it is already very late in the day. Often, these debts arrive for collection at 6-7 months past the due date.
If the delay were, say, limited to 3 months, the chances of successful recovery would be significantly increased. Then, there are sectors which objectively speaking, have suffered more than others such as the building trade.