Extending credit always comes with risk. Nowhere is this truer than in the logistics industry, where the process is complicated due to the many moving parts and different stakeholders that make up a supply chain. You can’t always avoid payment defaults, but with the right tools and strategies, you can minimise risk and speed up the debt collection process.
If a company does slip through the cracks, getting your money back can itself be a costly endeavour, and the longer you leave it, the harder it will be. Sometimes, using debt collecting agencies is the only way to press the matter with your debtor.
In this article, we discuss how to manage and streamline debt collection without using debt collecting agencies. We explain how the information resources and innovative credit management tools from CreditorWatch make this process faster and easier.
Managing credit risk and debt collection for logistics companies
There are a multitude of ways logistics companies can be exposed to financial risk and find themselves in need of debt collection services. The common credit risks associated with the logistics business stem from supply chain insecurity.
The unpredictability of world events and complexity of supply chains means there are virtually limitless opportunities for disruption and mismanagement that could lead to bad debt. These uncertainties include regional events like the outbreak of armed conflict or global catastrophes like the COVID-19 pandemic, in which 56 per cent of retailers experienced moderate disruption.
Natural disasters, cargo theft, and any number of geopolitical events can also cause payment delays or defaults to logistics companies, resulting in bad debt. Although risk is never fully avoidable in any sector, there are ways to manage the risks associated with these unpredictable demands.
Credit checks
Exercising the due diligence of credit checks is essential when extending credit to businesses. A company’s financial history is the best predictor of its future viability. Understanding their credit history will put you in the best position to make an informed assessment about the level of credit risk they pose to you.
CreditorWatch’s in-depth credit check takes into consideration high-risk indicators such as court actions, administration appointments, debt collection history, and payment defaults to arrive at a precise, reliable credit risk score. Other factors included in the report include business lifespan, company status, shareholder, director and address details, as well as any cross-directorships with other businesses.
Monitoring and alerts
A company’s financial health is always changing – sometimes slowly, over months or years, and other times literally overnight. Sometimes a company’s credit report will come up as perfect, but this doesn’t mean their future financial health or ability to pay is impervious to adverse impacts.
Our credit monitoring tool is the ideal system for effective, ongoing management of credit risks. You will be notified of any suspicious activity or changes to your customers’ financial health, such as if a debtor stops paying other suppliers, goes into administration or is taken to court.
Through real time email alerts, you will get a running summary of your debtor’s financial position, 24/7. This form of proactive credit risk management is a great way to make informed decisions and protect your business from bad debt.
High risk list and payment rating
Our high-risk summary is a fast, easy way to identify your biggest credit risks. Our AI-driven system flags payment defaults, mercantile enquiries, administrator or liquidator appointments, court actions and insolvency notices to generate a list of your most high-risk customers. This lets you know which assets to keep an eye on.
DebtorLogic
When payments start to slip, our DebtorLogic tool allows you to identify your customer’s payment trends and their propensity to pay any outstanding amounts. DebtorLogic is an interactive trade program that analyses your Aged Trial Balance (ATB) to identify any cash flow problems and help you stay ahead of bad debt. The program integrates the data of over 11 million trade lines from corporate ATBs, and Xero and MYOB data.
Improve due diligence and expedite debt collection
A credit report and financial risk assessment or international report through CreditorWatch gives you an accurate overview of a company’s current financial position, recent history, and likely future behaviour. These precautions are highly effective in limiting the risk associated with extending credit but cannot prevent it completely.
When payment defaults occur, you need to act quickly by prioritising collections and adjusting payment terms to ensure you get paid faster. Using the CreditorWatch debt collection tools and person locator, you can send payment reminder notices and letters of demand with our automated templates. These templates can increase your chance of collecting outstanding payments by up to 53 per cent.
Stay on top of your debt with CreditorWatch
Operating a logistics company is challenging at the best of times. Exercising all necessary due diligence and bolstering your debt collection strategy is the only way to reduce unnecessary exposure. With our innovative tools, you can make strategic, data-driven decisions and stay ahead of bad debt.
Contact us today to better understand how our tools can help protect your business from credit risk.
