Credit Manager Magazine 9/2021

33 CREDIT MANAGER MAGAZINE WRZESIEŃ / SEPTEMBER 2021 FECMA credit function. If we had to improve the way we grant and extend credit to our custom- ers, it would probably attract more profitable sales, improve cash flow and ensure long- term profit. Reichheld and Sasser conducted a study in 1990 and demonstrated that relatively minor improvements in customer defections can generate significant improvements in profit. Using Reichheld and Sasser’s argument, I ask: • What would be the result if one had to improve the processes and procedures that are currently being deployed to grant and extend credit? • What would be the result if one had to improve the invoicing system in order to decrease the number of disputes with customers? • What would be the result if one had to improve the internal communication system with the senior management team and with the other departments, such as the sales and the distribution units? • What would be the result on the cash flow of the business if one had to im- prove the Accounts Receivable/Debtors List monitoring processes? • What would be the result if one had to improve the communication with cus- tomers when asking them for payment and threat them as truly esteemed cus- tomers and not as debtors? Understand- ing and empathising with customers are critical during this pandemic crisis! • What would be the result if one had to employ effective measuring tools to as- sess the performance of the credit func- tion? Nonetheless, businesses recognise that their markets have changed and some economic sectors are still opening up for business fol- lowing a long period of completely closed for business with no revenue streams whatsoev- er and thus, lack the much needed cash flow to survive. Some other organisations are going bust and filing for bankruptcies. It is evidently clear that some successful and growing businesses may now be struggling to survive, laying off employees and will become insolvent if eco- nomic measures taken by the health author- ities, will not be completely released asap. Surely, this market adversity aspect needs thorough consideration by the trade credi- tors, as the financial data on customers has become not only out-of-date and obsolete but also irrelevant for the purpose of credit worthiness analysis. Therefore, Trade cred- itors should find other avenues, tools and sources of information that assist them in their credit decisions. Business communication is the only way forward during these challenging times! • Communication with customers in or- der to learn about the changing needs of customers and to monitor customers closely has become paramount. • Industry Credit Group Meetings should also assist trade creditors understand the changing environment of their in- dustries and possible strategies may be discussed and evaluated. • Sharing of data through Credit Refer- ence Agencies, such as MACM, is an- other helpful tool. Businesses get factual and daily credit information from the horse’s mouth in order to monitor their customers closely and effectively. Fresh and factual customer data reported by the trade suppliers is most significant and relevant for businesses to base their credit decisions on and to take appro- priate actions when collecting money from their customers. Conclusion During a recession, the secret lies in invest- ing in what a firm already owns and man- ages. The recipe for future business success is getting ready for when the weather gets bright and sunny again and not staying in- doors complaining about the bad weather. When it is bad weather and you cannot get outside, take the opportunity to put your house in order, so when the right time comes, you will be well prepared to go out and gain competitive advantage in the market! Josef Busuttil Josef was involved in the setting up of the Malta Association of Credit Man- agement (MACM – www.macm.org. mt) and is the Director of MACM. He has been a member of the Council of FECMA since May 2003. After twelve years occupying the role of FECMA Vice President, Josef was elected President of FECMA in November 2016. Josef is an intuitive lecturer and speaker, specialising in trade credit management strategies that enable the credit function to gain and sus- tain competitive advantage in the market, whilst ensuring sound cash flow and long-term profit. He deliv- ers in-house training and lectures for organised groups. Josef contributed to a number of training programmes and seminars organised by highly reputable international organisations and institutions, such as The Euro- pean Commission, in a number of countries, including Antwerp, Berlin, Bucharest, Dubai, Dublin, Johannes- burg, Kuala Lumpur, London, Ma- drid, Malta, Mexico City, Moscow, Paris, and Vilnius. Josef is a regular contributor of business articles to the international business press.