Small and medium-sized enterprises (SMEs) are starting to emerge from survival mode and are focusing on growth and stability although many still feel edgy about the state of the economy.
That is the conclusion of the latest edition of debt expert Prushka’s Canary in the Coal Mine briefing paper.
Roger Mendelson, CEO of Prushka Fast Debt Recovery, observes: “In the past three months, we have seen a noticeable trend in businesses shifting their focus to growth, a stark contrast to the period between mid-2012 and December 2013 where focus was largely on cutting costs and business survival.
“However, despite businesses starting to emerge from survival mode, concerns about the state of the economy has company directors nervous.
“Following the federal election, businesses are now moving back into expansion mode and are far more conscious of their expenses than during the heady pre-GFC days.”
Mendelson says businesses, and SMEs in particular, are more focused on their internal debt recovery processes than they were previously and are holding on to their overdue debts for longer.
“Prushka’s research shows 36 per cent of accounts referred to Prushka are between 90 and 180 days and 27 per cent are over 180 days old at time of referral. This is a pitfall for company directors who can improve cash flow substantially by referring accounts to a debt collection agency within 60 days.”
In order to expand business and receive additional orders, Mendelson says companies are being forced to extend credit terms and increase credit to their customers. “Insistence on pre-payment is a luxury which only large businesses, with a strangle-hold on their market, can afford to indulge in.”
He says making the decision to extend credit does not have to be risky for company directors as long as some key rules are followed by their reporting managers, including:
- Getting new customers to complete a new customer form, so that you obtain detailed information.
- Carrying out a basic credit check, such as an internet search and call the external accountant or a trade referee.
- Setting up trading terms and include a provision that if the customer defaults, he will be liable for all collection costs.
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