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‘We’ve needed to engage debt agencies to lessen our losses’

In addition to Calceus Consulting, I’m also involved in a distribution company and a branded business. 

Both of these businesses follow the classic branded sales model of cash out for samples and stock, some risk and then some reward.

Unfortunately as times remain tough, we’ve been experiencing more risk and less reward. 

Generally we’ve extended terms to previously good payers and taken deposits from new customers. This model has worked well for eight seasons and has enabled us to grow. However, bad debt and delinquency are now becoming an issue.

Opening two-way dialogue with debtors goes some way to closing the gap, but we’ve needed to engage debt agencies to lessen our losses.

Here in lies the conundrum: is it better to pay and credit check every customer and possibly reduce bad debt, or take more of a risk and pay higher fees on a small number of defaulting clients via debt collection?

My view in the current climate is it is definitely worth credit checking every customer. 

You can still choose to supply them if they are strategically important, but you’ll know who to start calling when the invoices are due and it is a lot less time-consuming and less costly than the debt collection route.

  • Dan Gyves, Managing director of footwear consultancy Calceus Consulting

Readers' comments (3)

  • Thierry BAYLE

    Dan, thank you for the key question.
    Sales are great but we need payment.
    With the current climate, a past "good account" may not be good anymore.
    So even if you decide to give credit for "marketing reasons", I would still strongly recommend to have a process to vet boutiques ( application form / payment plans ...).

    For me I have demonstrated that a creative credit control department can actually increase sales.

    What I bring to clients is also an American perspective. I lived there many years and I had to focus on credit management.

    It was interesting to see that in the USA, it was very common to get references from other brands.
    Would you be keen to exchange credit information on a buyer with a fellow brand owner?

    Let's see what are the options to reduce risks?

    Thierry B.

    Unsuitable or offensive?

  • Thierry BAYLE

    Debt collection Agencies : they can be very expensive but there again we must better manage the partnerships.
    Some charge a fixed fee and commission and others only commission.
    Managing the partnership goes well beyond the rate of course.
    We can discuss that.

    Thierry B.

    Unsuitable or offensive?

  • Thierry BAYLE

    The above reminds that we must also stress that Brands must carefully work the terms and conditions and ensure they protect the brand well.
    If you go to legal, every piece of written evidence is critical.

    As I was mentioning the USA, please also note that the USA T&C need to be different from the ones you have in the UK/Europe. Real savings to be done.

    Thierry B.
    PS: USA those can be easily supplied.

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