With the rising cost of capital starting to bite, CreditorWatch CEO Patrick Coghlan GAICD outlines strategies to guide companies in keeping the cash flow flowing.
1. Have a robust credit policy
Document and disseminate how your company determines creditworthiness, terms and conditions for credit sales, debtor management tools and procedures, credit hold procedures, staff responsibilities and payment methods.
If your credit policy is loose or incomplete, it’s a sign you have holes, which problematic debtors can slip through. Do you research a new customer’s credit transaction history before offering credit terms? Is your sales team aligned with your company’s credit policy?
Are you aware of the red flags to look out for when performing customer due diligence? It is likely that five to 15 per cent of your ledger has adverse information of which you are unaware. To mitigate credit risk, it is important to be able to identify risk indicators that highlight entities in financial distress.
Monitor and proactively manage your debtors
Late payments negatively impact the health of your ledger, subsequently affecting your cash flow. Businesses depend on steady cash flow for survival, so it is very important to keep an eye on everything that may affect this. By gaining a clear understanding of which customers are paying you late or failing to pay, you can expedite debt collection or remove them from your ledger to protect your business from bad debt.
2. Invoice immediately, without errors
It’s not enough to get your invoice out quickly — it needs to be correct, without omissions. Do you know who to send your invoice to? Will your invoice arrive with your debtors in time for their payment schedule? Every day that an invoice goes unpaid is money lost from your working capital.
3. Automate your reminders
Systematically send reminders — multiple and across channels if you need to. This can be a time- intensive job (and frankly, one of the most hated tasks in accounts receivables) so think about resourcing this with technology and automation so you can be sure you reach every overdue debtor — not just the big ones at the top of the list.
4. Automate your payment system
Your customers will have expectations of transacting with you online. Install an online payments gateway so your customer has a flexible payment option to pay you with a credit or debit card.
The added benefit of having a payments gateway is that you can add “Pay Now” buttons to your invoices, statements and emails, so your customer is one click away from depositing money into your bank account, heightening the action of an easy, healthy cash flow.
Automating the process also saves your accounts team valuable time.
5. Invest in customer relationships
Even a simple “thank you for payment” email shows your customer you are on top of your accounts and cash flow management — and appreciate their business.
Small actions such as checking your customer’s satisfaction and remembering their milestones with your business deepens the trust and connection you share. This will generate a knock-on effect when it comes to them paying you on time.
6. Use data to predict future default or insolvency
By understanding the payment behaviour of your trading partners and potential trading partners, you can better foresee any risks of debt and insolvency, and mitigate any impacts to your cash flow before it’s too late.
At-risk industries, in particular, would most notably benefit from predictive data and payment tools, helping to future-proof their cash flow and trading partnerships.
These tools can include round- the-clock monitoring and instant alerts based on warning signs, as well as broader economic reports, and tools for credit decisioning processes, which all help you to mitigate risks quickly.
6. Ensure you’re leveraging accurate and clean data
Accurate and clean data can make a major impact on the success of high-growth companies and their ability to mitigate credit risk.
Data is a valuable asset, and it is imperative that a company makes the improvement of data management a priority.
The first step to take is cleansing your database. Perform an audit of the existing database and begin the process of fixing instances of human error, and making the reading of data clear and concise. If the latter is too significant a task for employees, leverage data management tools to streamline this process and help to improve data quality.
Top risks for business 2023
RiskMap’s Top Risks for Business 2023 forecasts that the US-China relationship will be the greatest geopolitical risk for businesses in 2023. While conflict remains unlikely, companies must monitor both nations’ concerted efforts to decouple critical supply chains in the wake of the pandemic and Ukraine war.
In the international security risk landscape, escalation and overspill risk from the Ukraine-Russia conflict will remain. However, few organisations have seriously considered the risk of a major conflict in East Asia, given the region’s importance to global trade, manufacturing and growth. Preparing for these scenarios must now be an integral part of organisations’ strategic planning and decision-making processes, not a subject for localised, reactive crisis management.
The cyber arms race will accelerate in 2023, triggering a fundamental breakdown of global networks into distinct regional or even national architectures. The key will increasingly be decentralisation to gain efficiencies and control.
Another challenge for businesses will be managing energy disruption while pursuing adaptation. Businesses should plan not only how to survive the short-term price and supply shock, but also how to thrive in a new, comprehensively rewired global energy system.
In the regulatory sphere, governments around the world will be targeting revenue and striving to steady state finances. Regulatory and compliance dilemmas for companies trying to do business in both the US and China seems probable.
Accenture future of work
Only 35 per cent of workers are satisfied with their company’s approach to flexible work, the Accenture Future of Work 2022 study has revealed. This is due to a lack of technology, tools, and empowerment that employees need to be healthy, happy, and productive, no matter where they are working from. The research found that companies that support their workers in new ways can unlock their potential, regardless of location. It is time to rethink traditional work models and enable workers to be productive from anywhere.
Companies are struggling to withstand the pressure of numerous challenges — including supply chain stress, security threats, inflation, mixed economic signals and changing customer expectations — while operating in a tight talent market. The research showed that employee expectations of their employers are escalating, with the perception that organisations are responsible for leaving workers “net better off” having increased among workers in the last year. The expectation that companies should connect workers with purpose has seen the largest increase (plus five per cent). However, the perception that people’s companies have left them net better off has not changed since last year. As a result, 26 per cent of workers have been with their current company for less than three years, and an additional 19 per cent intend to leave their organisation.
Some 70 per cent of workers globally have some level of caregiving responsibility, with over eight per cent caring for both children and elderly parents. Only 30 per cent of workers see a connection between their work and their company’s broader purpose, and only 29 per cent trust that their company’s leaders have their best interests at heart. Additionally, one in six workers are constantly connected to their work, team, and organisation.
COP15 and beyond
The 15th Global Biodiversity Conference of Parties (COP15) in Montreal, in December 2022, culminated in the adoption of the Kunming-Montreal Global Biodiversity Framework, setting out a series of global targets to address biodiversity loss and restore ecosystems by 2030. COP15 marked a fresh and constructive approach to Australian participation at the conference, according to Gilbert + Tobin partner Ilona Millar.
While businesses await guidance on how the globally funded framework will apply domestically, Millar advised opportunities may arise from the call for parties to encourage private sector investment in biodiversity. “There will be challenges, too, particularly for resource-intensive businesses whose practices are not yet aligned with biodiversity conversation,” she said.
Millar will speak at the upcoming International Business & Climate Conference in Cairns (IBECC), alongside David Parker AM GAICD (chair Clean Energy Regulator), Martijn Wilder AM GAICD (CEO and founder Pollination) and Anna Bligh AC (CEO Australian Banking Association).
IBECC is offering a 25 per cent discount to AICD members for their choice of registration fees. Visit ibecccairns.com for details, using discount code AICD25 when prompted.
Propel’s The Digital Reputation Report analysis of the ASX 200 CEOs on LinkedIn indicates that online anonymity is not an effective strategy for survival. Leaders must consider their digital reputation.
According to the 2022 Edelman Trust Barometer, 80 per cent of people expect CEOs will be personally visible when discussing policies and actions. Furthermore, they don’t want regurgitated corporate messages — 82 per cent expect leaders to use social media to communicate mission, vision and values (Brunswick Group Connected Leadership Report).
The Propel report also reveals that female CEOs are outperforming their male counterparts on a number of key metrics:
Female CEOs average 1.9 posts per month (22.8 posts per year) — almost 3.5 times more than male CEOs (6.76 posts per year).
“Very active” female CEOs average a total of 14,567 engagements on their posts — 45 per cent more than their male counterparts (who average 9999 engagements over the same period).
With fewer than half the average number of followers, “very active” female CEOs are generating almost 150 per cent more engagement than male CEOs.
Australia’s Day Honours List 2023
AICD congratulates these members recognised in the 2023 Australia Day Honours.
Australian Capital Territory
Lieutenant General John Frewen AO DSC AM GAICD
Fiona Godfrey OAM GAICD
Deb Butterworth AM MAICD
Jake Penley CSM MAICD
Lucinda Barry AM MAICD
Jane Urquhart PSM GAICD Dr Sonya Bennett AM GAICD
New South Wales
Jan Mangleson OAM MAICD
Rear Admiral Peter Quinn AO CSC AM MAICD
Dr Debra Graves OAM FAICD
Michael Stafford-Bennett AM FAICD
Alan Rankins OAM GAICD
Joanne Muller AM GAICD
Rod Halstead OAM FAICD
Prof Clara Chow AM GAICD
Jennifer Collins AM MAICD
Prof Gemma Figtree AM GAICD
Ange Coble OAM GAICD
Jane Freudenstein AM GAICD
Nicola Wakefield Evans AM FAICD
Margaret Bennett OAM MAICD
Dr Roslyn Crampton OAM MAICD
Peter McKechnie AFSM AAICD
Dr Lisa OBrien AM GAICD
Catherine Weber PSM GAICD
Victor Hoog Antink AM FAICD
Dr Kirstin Ferguson AM FAICD
Don Bletchly PSM GAICD
Rob Boniwell AFSM GAICD
Kevin Humphreys DSC GAICD
Bronwen Edwards AM GAICD
Rhys Newton APM MAICD
Helen Edwards AM GAICD
Juliet Brown AM OAM FAICD
David Smith CSC AM, DSM GAICD
Rev Prof Peter Sandeman AM MAICD
Dr Roger Sexton AM FAICD
Alexandrea Cannon OAM FAICD
Dr Amanda Rischbieth AM FAICD
Mary Patetsos AM MAICD
Assistant Chief Fire Officer Brett Loughlin AFSM AAICD
Sarah Merridew AM FAICD
Craig Limkin PSM MAICD
Sue Hunt AM MAICD
Patrick Flannigan AM FAICD
Merran Kelsall AO FAICD
Dr Stephen Duckett AM FAICD
Dr Michele Allan AO FAICD
Prof Bruce Thompson AM MAICD
Prof Stephen Cornelissen AM FAICD
John Simpson AM MAICD
Tom Mollenkopf AO FAICD
Jane Hemstritch AO FAICD
Paul Scroope OAM MAICD
Joy Leggo OAM GAICD
Marc Rhodes CSC MAICD
Prof Gail Risbridger AM MAICD
Elizabeth Drozd OAM MAICD
Steve Scudamore AM FAICD
David Eaton PSM GAICD
Dr Michael Levitt AM GAICD
Dr Russ Russell-Weisz PSM FAICD
Jonathon Leek OAM GAICD
Emily Roper PSM MAICD
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