Spanish companies believe that the internal mismanagement of their customers is affecting their ability to pay, according to Intrum’s European Payment Report. Whether due to poor administration, or the current economic context, marked by inflation and rising rates, 64% of Spanish companies are more concerned than ever due to the payment capacity of its debtors.
Although economic uncertainty is a fundamental factor that inevitably affects the financial situation of companies and, consequently, their ability to pay, the most important element to prevent non-payments in the business network is that companies apply internally a effective payment management strategy. In this way, it will be possible control, plan and validate correctly the capital of the company destined to pay the outstanding invoices with suppliers, assuming and complying with the conditions -terms, quantities, etc.- that these establish. However, despite its importance, the planning, control and monitoring of this type of game is still not what it should be.
According to the report, for 60% of Spanish companies, administrative inefficiency It is, right now, one of the great challenges that are having an impact on the payment capacity of its customers.
In fact, among the 29 European countries analyzed by the leading credit and asset management services firm, Spain would be four percentage points above the European average (56%) and among the first five markets that most think that this problem is one of the most preventing their customers from keeping payments up to date.
With a percentage similar to that of Spanish organizations is the United Kingdom (also with 60%) and, below, countries such as France (56%), Portugal (55%), Italy (54%) or Germany (53%). For their part, the Netherlands (65%), Latvia (63%) and Estonia (61%) would be the three markets that most coincide in this perception. However, Denmark (49%), Bosnia (47%) and the Czech Republic (45%) are the regions whose companies least see administrative inefficiency between clients as a challenge for non-payments.
These figures show that the effective payment management it is one of the main requirements to maintain a healthy cash flow and prevent defaults, but also that it is a complex process that not all companies are capable of undertaking. Above all, when the business grows, and with it, in level of activity and expenses.
In order to facilitate this process and offer some solutions, Intrum experts offer the following tips to apply a correct payment management strategy:
- Consider payments as part of financial planning. In this way, it will be possible to anticipate each commitment in advance and make the best strategic decisions (for example, when establishing collection periods with clients, automating some periodic expenses…).
- Keep the invoices in order and contemplate each expected expense. It is important that, in order to avoid incurring defaults, a calendar is available with all the payment dates, highlighting those that have priority. Those periodic items that represent a future financial commitment and that are often overlooked should also be taken into account.
- Constant comunication. If it is not possible to meet the payment dates, it is necessary to notify the provider and try to renegotiate or restructure the outstanding debt. They are a basic pillar for business success and the true allies of the business, therefore, it is necessary to maintain a good relationship with them. In this sense, having a company specialized in debt management can be a differential factor.
- Study the providers. It is necessary to take into account the collection conditions offered by each one (if you request payment in advance, required collection terms, discounts for wholesale purchases or prompt payment…), and choose the one that best suits your business interests.
Customer defaults, the main concern for 2 out of 3 companies
Whether due to poor management or the current economic context, companies are witnessing how defaults are increasing. According to Intrum’s European Payment Report, 64% of Spanish entities are more concerned than ever about their debtors’ ability to pay, two points above the European average (62%).
Figures that, predictably, will grow in the coming monthssince the study carried out by the credit and asset management services firm also indicates that 57% of the companies anticipate that the risk of non-payment or delay in the payment of invoices of these debtors will grow in the coming months.
These data would be in line with the official information of the sector. According to the latest ‘Financial Stability Report’ from the Bank of Spain, the sharp economic slowdown that is anticipated for the coming quarters could have a negative impact on the economic and financial situation of companies, especially if the risk scenarios for economic growth materialize.
Therefore, if a preventive position is not acquired, guaranteeing an administration and process management that ensures the correct payment to suppliers, the consequences will not only affect the affected companies, but also in society in general, due to the harmful domino effect throughout the the supply chain, employability and the growth of the business network.