Within the often murky world of construction, transparent data gives your team the inside track. Prospective trading partners in the sector have been known to sometimes take steps to obscure or obstruct the discovery of credit risk or instances of malpractice. Empowered with accurate and relevant business information, weighed against market data, your decision-making process is reinvigorated. Ensure the accuracy of who you’re dealing with, and their associated risk profile, through the use of the intuitive creditor management offerings from CreditorWatch.
How to identify high-risk debtors and prioritise collections
The construction sector has frequently been in the news as of late. Insolvencies are on the rise, as overextended builders sweat the ramifications of raw material price hikes, changing loan conditions, and the ripples of international conflict. The collapse of Oracle Homes in August ‘22 exemplified the ever-present danger from risky entities to adjacent businesses. Beyond leaving over 300 houses in the lurch, numerous trading partners were rendered suddenly defenceless.
A high-risk debtor is an insolvency trap waiting to spring on your business. Doubly so if the value of the trading relationship is high. Your accounts payable rely on steady cash flow, and if the bulk is dependent on one partner, you had better be sure that they’re reliable. If they go insolvent owing the money you need to pay outgoings, then the situation may be terminal.
In an ideal world, high-risk debtors should voluntarily communicate their budgetary circumstances to you as they change. Unfortunately, we know this isn’t the norm, especially within sectors such as construction. Even as they witness costs skyrocket, directors and management will manoeuvre to keep their elevated risk from your view. In protecting their own reputation, they may be setting the wheel in motion to destroy yours.
The identification of high-risk debtors revolves around transparent data and robust collection procedures. Precise investment into tools that leverage extensive datasets, maintained for accuracy, could pay off handsomely. Once empowered with the ability to clearly identify risky creditors, the team can be proactive in the pursuit of the money owed. The earlier that money is recovered, the safer your operation will be.
Keys to good debtor management with DebtorLogic
The trade payment platform DebtorLogic, from CreditorWatch, clarifies your view on your debtors, the market, and where to direct the focus of your collection. It does so by way of a number of intuitive features:
Analyse Your Aged Trial Balance (ATB) – Upload your portfolio of creditors and reveal the truth of their creditworthiness. DebtorLogic is the only trade payment platform to combine small business and corporate trade data to deliver market-leading insight and accuracy concerning risky creditors. Customer and supplier payment trends are compared against industry averages, revealing those partner businesses increasing in risk in real-time, through sophisticated 24/7 monitoring and alerts.
Assessing a partner’s payment behaviour within the context of wider changing market conditions increases the potency of the analysis provided. If the market dips, payment behaviour may be expected to fall accordingly. DebtorLogic will identify those businesses whose payment tendencies deteriorate beyond what might be expected from an average supplier in the market. These entities are high-risk and must be prioritised for collections. Once you know, you can take action.
Ensure Clean Data – The extensive datasets maintained by CreditorWatch, accessible through DebtorLogic, take the guesswork out of ensuring the reliability of provided information. Our trade payment, behavioural and demographic databases are maintained to the highest standards of accuracy, ensuring that your business can rely upon the information provided.
Considering the actions construction businesses have taken previously to obfuscate their malpractice or increased credit risk, an investment into a service that guarantees clean data is a no-brainer. The survival of your enterprise should be reliant on the word of a partner business. Leverage the information available through DebtorLogic, and develop a clear view of the status of creditors.
Prioritise Collections – With access to transparent, reliable business data, you can confidently direct the team to focus on the collection of payments from the highest-risk trading partners. DebtorLogic reveals the deeper insight necessary to distinguish the good construction customers from the bad, enabling action. It may be that you need to adjust your payment terms as conditions change.
Once risky creditors are identified, we offer a range of flexible debt collection solutions to expedite payment. From letter templates bearing our powerful third-party endorsement, shown to increase the likelihood of payment by 53%, through to the seamless integration with Xero and MYOB – enabling your team to highlight risky debtors direct from the dashboard.
Streamlining your debtor management and collections process through the use of DebtorLogic, and the wider CreditorWatch suite protects your vital cash flow in a time of significant industry uncertainty. Construction can be high-risk, but with the right protections in place, it can turn high reward.
Use your resources wisely and triage the most critical collections. Contact us for a free demo of DebtorLogic and learn how to prioritise high-risk debtors.
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