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Good credit management pays – a blog by Philip King

15 May 2014

Intrum Justitia has published its European Payment Index. It’s an impressive survey carried out annually across 31 countries and involving several thousand companies, and its 2014 findings make interesting reading. The comparison between payment practice in different countries and regions always fascinates me but what caught my particular attention was its downbeat conclusion that “Europe’s recovery from economic crisis is painfully slow” and that “the downturn’s tail is still wreaking a dire impact on business activity.” Asked whether their business had felt the impact of a general economic recovery during the previous three months, 72% of those surveyed said they had experienced no change whatsoever.

Payment duration has reduced from 49 to 47 days but, in 21 of the 31 countries, bad debt has increased or remained stable at best. The report cites the three main reasons for late payment as: financial problems being suffered by debtors; intentional late payment by debtors; and inefficient administration resulting in late payment not being followed up quickly enough.

On a more positive note, “the survey underlines the key role that credit management tools at a micro level play in reducing bad debt risks, strengthening the economic strength of companies, and ultimately aiding European economic recovery.” It also points out that more companies have learnt the lesson of having a good credit management process in place. Whilst this may not have significantly speeded up payment, it has lessened the risk of non payment.

No surprise to me that good credit management is adding value!

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