Debt Recovery Update: Beware The Waves On A Rising Tide!

Author:Mr Jason Harte
Profession:Mason Hayes & Curran
 
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The performance of the Irish economy in 2014 has received many plaudits.  Our annual GDP growth was reckoned to be the highest in the Euro area.  Unemployment fell by some 1.6% in 2014, contributing significantly to a growth in tax revenues, particularly income tax and vat.  Consumer confidence seems to have improved and with it, though some retailers would disagree, consumer spending.

The perceived wisdom since the downturn began, is that the lack of credit in the economy has been a barrier to Ireland's recovery.  However, 2014 saw both public and private sector efforts to provide more access to credit, for small and medium sized businesses ("SMEs") in particular.  The announcement of initiatives by the banking sector to provide funds for such businesses to grow and innovate was welcomed.  Practically all high street lenders indicated that the amount of funding they provided to business in 2014 had increased from the previous year. Other sources of non-bank finance for SME activity, such as the state-backed Strategic Banking Corporation of Ireland and certain local enterprise board schemes, expanded last year too. 

Even in the context of recent growth, lessons learned during the economic downturn are likely to impact any business' or lender's credit decisions.  It is in this context that it is sensible to be mindful of good credit management practices if a business is to avoid being swept out to sea or crashing into the rocks.

Before you provide credit to a new customer, get to know them as well as you can.  Use a detailed Credit Application Form for this purpose.  Check their exact name and legal status, and later make sure that any order actually comes from that same entity.  Often, creditors do not know whether their customer is a sole trader, registered business or a limited company.  It is vital to check this at the start of the relationship.  Carry out credit checks on the potential customer and ask for permission to obtain references from other suppliers, and check such suppliers out carefully too.  You should update your credit checks on a regular basis.  Consider obtaining personal guarantees from company directors before extending credit to new companies.  Every business providing credit should have an effective credit management policy.  Your staff, especially sales staff, should be aware of it and it should cover credit terms and credit limits for new customers.  All members of staff should buy into ownership of cashflow...

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