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At year end, put the turbo on debt collection

Why and how to optimize the accounts receivable at end of the year, which often corresponds to the end of the companies' financial year?

Cash collection end yearFor many companies the end of calendar year corresponds with the end of their financial year. The balance sheet as of December 31 will form the basis of evaluation of creditworthiness done by many analysts:
  • Credit insurers
  • Banks
  • Suppliers
  • Clients
  • ...etc.
These actors and partners seek to determine the risk to work with your company on the basis of this document which is only partially representative, since there is always a delay between the date of the picture (the date of balance sheet) and date on which the analysis is done.

It is therefore necessary to present the most favorable situation possible in accordance with the accounting rules.
 Many companies that skew their balance sheets to improve reading will be ridge. These devices do not withstand the credit analysts who can detect manipulation of financial statements. The backlash is so scathing. To avoid!

Working capital and DSO, key points of the analysis of solvency

The first objective of the analysts is to determine the creditworthiness of the company, ie its ability to meet its short-term commitments.

For this, the reduction of working capital requirement and accounts receivable (DSO) are essential.

Indeed, a company that is quickly paid by customers will pay suppliers and financial partners more easily than a corporation with an average payment of its receivable of 120 days!

The client must be optimized throughout the year and even more at the year end.
December is a crucial month to make an effective recovery of receivables.

What tools available to companies?

  • First essential tool, the friendly cash collection should be conducted with extremes rigor and a willingness to get paid. The use of exceptional actions can significantly improve cash receipts. For example, sending standard letters "year-end" are particularly effective.
  • Second means, commercial negotiation. The end of year is a good time to offer its customers a prepayment against an attractive discount offers. For example, propose paying bills matured on January before 20 December against a discount of 1%.
  • Third lever, the use of specialized partners such as debt collection agencies to recover difficult receivables or a here.">factoring companies to carry out an assignment of receivables.
 Be careful, only a sale of receivables without recourse can definitely clear the receivables in the balance sheet. We talk about deconsolidation.
It is time to launch one of these actions in your company at the end of 2014 to improve its image among your partners and ease its cash to start 2015 on the right foot.
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Last comments

Right you are, Betrand. We tend to 'hold back' a bit at this time of the year. It is a good time to re-focus, ensure our team has the right attitude. A deal is a deal.

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