Plugging up the debt drain – magazine feature
No one wants to say no to a job because a client may be a slow payer, after all you will get paid, eventually—or will you? Surely it’s better to have a slow paying client than no client at all?
It depends on what it costs you. Writing off a single bad debt of $2,500 (operating on a 10 per cent profit) will need $25,000 in extra sales to cover it—that’s not a good option. If you have to pay your creditors faster than your debtors pay you—that’s also not a good option. It means you are funding your debtors.
Printing Industries benchmarking data shows that at mid-level performance, average debtor days are 55 and average creditor days 29. Possibly familiar for some, but if your profit to sales is under three per cent, this level of debt is enough to wipe out a considerable proportion of your gains.
Credit where it's due
Benchmarking also shows that the best performing companies have about 35 average debtor days and 52 average creditor days. What you do and where you are may also impact on your credit management. In the September 2005 Printing Industries Quarterly Trends report just about all sectors of the industry, except desktop publishing and graphic reproduction, reported increases in the number of outstanding debtors.
Companies from all states except Tasmania (unchanged from previous quarter) and Queensland (improved from previous quarter), reported increased number of outstanding debtors during the same period. The largest net balance increases were reported by companies from Western Australia (22.2 per cent) and Victoria (21.6 per cent). This is not an isolated result and is probably an illustration of what is considered standard business practice. It can be improved.
The benchmarking project again provides some practical advice:
No one wants to say no to a job because a client may be a slow payer, after all you will get paid, eventually—or will you? Surely it’s better to have a slow paying client than no client at all? There are also some standard procedures you should be following within your business to avoid non-payers or bad payers.
Help is available
Before you do business with a new client, check out their credit performance, since this will tell you how and when you may get paid. Clients with bad payment records or payment default records are not worth having. There is no point putting work on your presses that may keep them utilised but which costs you money! Printing Industries Credits has a range of reports to help you do this available at
They include:
Ideal if you just need to find out about bankruptcies, judgements and summons data.
Check on a business before doing business. Without adequate information, a decision to ship goods to an unknown company can put you in a highly vulnerable position.
The Dynamic Delinquency Score (DDS), a compilation of financial, credit and demographic factors, is a statistically derived measure that assesses the probability of a firm paying its bills in a severely delinquent manner.
The ASIC Company Extract provides real time access to information from the Australian Securities and Investments Commission (ASIC).
This ASIC Historical Extract provides all of the information in a Company Extract, plus a full history of these details. This includes previous directors, company name and much more.
A business name is a name under which a business operates which gives you detailed, up-to-date information on the business you are searching on.
Provides much of the same information as the ASIC Company Check but related to an individual.
Payment Analysis presents you with the ability to analyse a company’s past payment behaviour and expected future performance in precise detail.
DRS functions as a fiscal crystal ball, evaluating the probability that a business will experience severe financial distress due to one of the following conditions: ceasing operations, owing money to creditors and insolvency.
However, should your diligence fail to pay off, remember it is still your money and you need to get it back. Printing Industries can assist with debt recovery services. Remember a customer that doesn’t pay, isn’t a customer at all.
What do you think? Come back to Joe: joe@printnet.com.au
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