Credit Managers: Do you know your risk?
Credit Managers: Do you know your risk?

Risk is when your loss can easily surpass your gain – severity of that loss can come down to exposure and vulnerability of your business. In many industries, risk takes various forms and the risk factors that could affect your business the most could be external – economic downturn and insolvency.

Risk is an unavoidable part of the credit function, but a proper functioning credit team should be aware of the risks to the financial position of its business.  The adage that ‘cash is king’ is a business truism.

Depending on the level of debt exposure to your business, a customer failing to pay within terms can result in insolvency and flow on loss to your company.  Cash management is therefore crucially important.  If cash is not managed carefully, those bad decisions could put your business at risk.

Given the current uncertainty in the economy, ask yourself the following questions:

  • How robust is your business if the economy took a downturn and a customer failed to pay in accordance with trading terms?
  • Do you have a credit team that knows exactly what to do to get your money back if your company is unable to collect through standard collecting practices?

If you are unsure how to answer those questions, now is the time to revisit your trading or supply agreements to consider whether the terms and conditions are sufficiently aligned with the risk appetite of your business.

With prudent legal advice from the outset, your exposure to risk can be reduced dramatically.

Here is how Holman Webb can help:
Terms and conditions

Well considered terms and conditions in any contract are vital to mitigate risk and safeguard any business from external risks.

Appropriately worded terms and conditions can mean the difference between a successful recovery and a write off or a loss. 

Do your terms and conditions include the following?

  • Personal guarantee and indemnity
  • Enforcement costs and expenses
  • Contractual interest
  • Charging clause
  • Retention of Title – PPSA
  • Certificate Clause
  • Privacy Clause
  • Other forms of security

If you find that your internal collection activity does not result in payment from a customer then litigation is an option. No business wants to unnecessarily litigate because it is typically more desirable to work collaboratively with customers to address any non-payment issues.

However, if your customer’s cash-flow problems are affecting your business, you may need to consider litigation and other enforcement options.  There are a number of prudent steps which can be taken to put creditors in the best position to successfully deal with credit risk.

Holman Webb’s Commercial Recovery and Insolvency Group has decades of experience in the credit industry, and understands the importance of implementing suitable credit agreements and terms and conditions. 

Partner Christopher Hadley and Special Counsel Andrew Tanna are on standby for businesses requiring assistance with reviewing, drafting or updating credit agreements and terms and conditions - and to commence litigation.

If you have any questions regarding the content of this article, please don’t hesitate to get in touch today.

We are pleased to invite you to join Holman Webb's Commercial Recovery and Insolvency Group for our upcoming webinar: 'Tips to improve commercial recoveries and increase cashflow', taking place from 11:30am (AEST) on Thursday 4 August.

Presented by Holman Webb Commercial Recovery and Insolvency Partner Christopher Hadley, and Collections Software Specialist Griffin Swanson, this interactive seminar will cover best practices for collections leaders.

Topics covered will include:

  • What are the impacts of the risk you take on?
  • What’s the worst that can happen?
  • Why does this matter?
  • Could increased ATO activity bring about more insolvency?
  • Why does this impact on trade creditors?
  • What are we expecting to see in the coming year?
  • What can you do now, to mitigate this risk?
  • What is the simplest, and most effective way to protect your credit risk?
  • Important terms and conditions

This seminar will be highly relevant for CEOs, CFOs, Credit Managers and Collections Specialists.

Date: Thursday 4 August 2022

Time: 11.30 – 12.30pm AEST

CPD Accreditation: Attendees will be eligible to receive 1 CPD point

Lunch is on us!

  • All webinar registrants will go into a draw to win one of ten $30 Uber Eats vouchers
  • Winners will be selected at random at 9.00am on Thursday 4 August.
  • Winners will receive their Uber Eats voucher code by 10:30am on Thursday 4 August.

For more information:
Bill Montgomery (Business Development & Marketing Manager)
T: +61 2 9390 8457

Recent Posts