Difficult debtors on the rise: companies rethink credit management

There has been an increase in the number of what we call difficult debtors. In fact, an Aptic survey* on the state of credit management has revealed that 29% of companies are dealing with more late or unpaid invoices during the pandemic. To limit the impact, many are intensively reworking their credit management procedures. In this blog post, we’ll take a closer look at the research. We will also take a look at the strategies you can adopt to make your credit management more efficient.

The spread of COVID-19 and the various preventive measures slowed economic activity during the first half of 2020. The pandemic caused huge uncertainty and put pressure on the cash position and liquidity of many organisations.

High debt burden and a lot of speculative credit

We mustn’t forget that the crisis is taking place against a background of high corporate debt, fuelled by low-interest rates. Although investment helps the economy to grow, the IMF warned early on that the increase in corporate debt required vigilance. The Economist called high non-financial corporate debt the Achilles’ heel of the global economy, which has the potential to hinder economic recovery.

About 30% of corporate non-financial debt stocks currently rated by S&P are in entities rated as Speculative, according to research firm Vox. Additionally, 40% are in entities rated only BBB (the lowest rating in the investment-grade category).

Breeding ground for financial vulnerability

The number of bankruptcies fell by 30% during the pandemic, according to the OECD. However, the vulnerability of European companies increased during the crisis. The European Commission has already pointed out that a lifeline in the form of support measures is hiding the precarious position of many companies.

Difficult debtors

All of this leads to increased credit management concerns, which our research confirms. We surveyed 404 finance professionals who work for organisations with more than 100 employees. More than 30% of them expect that the number of invoices paid late or not paid at all will increase when they withdraw the pandemic support measures. And 29% say that the proportion of invoices paid late or not paid at all has already increased since 2020.

Credit management as a business partner

Because of all this, many companies are giving credit management a more prominent role. No fewer than 41.3% of finance professionals indicate that the importance of credit management at their company has increased.

As a supplier of software for credit management, Aptic sees an increasing demand from the market for data-driven and granular tools. This interest in optimised credit, debtor, and collection procedures is also clear from the results of our independent survey. It showed that 31.9% of respondents already adjusted their credit management procedures last year.

Credit management = software + human input

We know that optimal interaction between credit managers and debtor software makes a huge difference. That’s why Aptic offers software that allows businesses to organise their credit management in an efficient, targeted, and customised way. It provides the tools you need to follow up outstanding invoices in a customer-friendly manner, quickly identify changing payment patterns, and collect outstanding amounts via alternative methods such as factoring.

(*) Research conducted by Kien, on behalf of Aptic, among 404 Dutch finance professionals, in May and June 2021.

Would you like to learn more about how to detect difficult debtors? Download our latest whitepaper, or feel free to
get in touch with us here at Aptic and we will do our best to help you. We would also love to answer any questions you have regarding topics such as software for the financial services industry, lending-, factoring- and debt collection software, and many others.