Corporate solvency, how to prevent non-payment  

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Corporate solvency
Investigate the creditworthiness of your business partners to get to protect against non-payment is highly recommended.
To do this, you can easily, like the big companies, use external service providers to provide you with a complete financial report and an accurate evaluation of the credit riskor make an estimate of the corporate creditworthiness yourself by having financial information necessary.

In both cases, regular monitoring of the financial health of your customers, and even of your main suppliers, is essential.

The customer risk is a data to be updated regularly and the updating of data is essential.

Your good financial health, and even your sustainability, depends on the solvency of your customers and suppliers.but also of your supplierss.

In times of crisisss, as s'announces the aftermath ofCovidit is even more vital to remind you of the wise adage "prevention is better than cure"!

Declined as a standard rule of sound management, this adage does not loses none of its relevance: it is better to to prevent unpaid bills than to collect them.

What is corporate solvency?

The solvency ofae enterprise refers to a company's ability to meet its short, medium and long-term financial obligations.

Creditworthiness is a different from liquidity.

Indeed, liquidity is the ability to honor payment commitments that have come due, it is an immediate or short-term solvency.

A company can be qualified as solvent although it is in lack of liquidity ! (bank account, cash) or quasi-liquidity (assets that can be quickly transformed into cash).

On the other hand, immediate liquidity can hide a medium or long term insolvency (long term supplier debts, taxes, dividends, etc).

How analyze the creditworthiness ofa company?

Technically, corporate solvency can be measured by several metrics borrowed from the discipline of financial analysis:

  1. Assets - Liabilities : your client would be solvent if the result of this subtraction is positive.
  1. Total debt / Total balance sheet : if this ratio is greater than one, the company will be considered bankrupt or in serious difficulty.
  1. Net debt / gross operating surplus : called " CAF "This ratio allows us to estimate a company's ability to pay and and repay its its debts.
  1. Gross operating surplus / Loan and lease payments : this rate is widely used by credit organizations. The higher it is, the more the company has the possibility of increasing its debts and to resort to borrowing

It is also important to note that all of its ratios are calculated from the balance sheet of thecompany's balance sheet. It is important to note that commercial companies, with the exception of micro-entrepreneurs and self-employed entrepreneurs, are required to publish their balance sheet and operating account: they are free for public consultation.

Thus, you have access to financial information sufficient and immediate on your customers and prospects. En going through firms specialized in financial information.

Other financial ratios can be used to refine the to refine the estimate and measure the financial risk. In the same way, sources of of information available to flesh out your solvency study: commercial information, legal information, internal information (your accounting, your outstanding customer reports).

The informationns financialscommercials and legals thus obtaineds wills à the preparation of the solvency report and for scoring of the company.

Corporate solvency: what is a solvency report?

A typical type credit report of a company maps out the of credit history. It aims to limit credit risk by identifying the warning signs ofpayment incidents (late payment or de non-payment).

Established by external providers who are experts in evaluation and solvency d'The financial or credit report contains the following elements

  • Company legal information: legal identification is particularly useful for detecting shell companies (to be generalized to any new prospect).
  • Collective proceedings : recovery, liquidation, pending lawsuits, judgments or liens registered in the legal register
  • Payment patterns: Timeliness of payments, payment history, history of amicable or legal collections.
  • DGCCRF penalties : The DGCCRF issues and publishes administrative fines due to late payment.
  • Credit score determined by Financial Experts

Corporate Solvency: what is scoring?

Scoring is a measure of the financial risk associated with a credit.

Historically, it was established in the United States to statistically evaluate the profile of individuals seeking credit but also the payment behavior of companies..

For companies, the elements taken into account to give a score are: seniority, sector of activity, profit margin and turnoverpayment behavior, sectoral payment sector.

How to protect yourself from unpaid bills?

It is worth remembering that 25% of annual annual insolvencies are caused by payment incidents!

In order to ensure your own creditworthiness you must consult the many external sources that provide information on your customers and prospects (balance sheet company, operating account, legal registrations) and use the multiple measures to prevent the risk of non-payment.

Here is the presentation of the most effective ones:

Assessing customer risk

We have already discussed above how to measure the solvency of a company. The application of this approach makes it possible to classify customers according to the credit risk they present.

High-risk partners will be managed with more care and caution: This can be done by arranging for "credit-client " by the implementation of a choice of cash payment, a request for a down payment, of penalties and d'other guarantees stipulated in the contract of service or sale.

Find out about customers

You can collect information about your business partners from several sources such as such as:

The commercial register, the land registry, the organizations credit agencies and the commercial information agencies.

You will have including access to legal registrations, balance sheet d'You will have access to legal entries, company balance sheet, operating account and payment incident history.

You can also use ourcredit investigation credit investigation services here:

Request guarantees from at-risk clients

Certain guarantees may be requested from customers with a poor scoring to reduce the risk of non-payment:

  • surety and omnibus bond;
  • first demand guarantee ;
  • the letter of comfort signed by the parent companies;
  • Pledge and collateral.

Discounting your trade receivables

The mobilization of your commercial receivables consists in transmitting to your bank, for collection, the payment orders and bills of exchange subscribed by your customers before their due date. Discounting is a method and a guarantee of payment that allows you to to balance your financial situation at a given moment but does not guarantee you of payment on the due date. on the due date.

Using factoring

Factoring consists of obtaining advance financing from a specialized external organization (your banker has this service this service internally!). The FACTOR takes care of the recovery of the unpaid debts in return for a commission on the sums recovered. (The commissions are sometimes and often prohibitive and the results are often disappointing compared to those of a bank.he results are often disappointing compared to those of traditional or online collection agencies).

In the event of non-payment and failure of the collection procedureand the collection procedure fails, the prefinanced invoices are defined by the FACTOR and you will have to try to to collect your your outstanding unpaid before you write it off.

Follow up on a defaulting customer

Before hiring a collection or judicial collection of your of your debt, it is advisable to carry out reminders in internal reminders by calling your debtor.

If you are unsuccessful, consider sending a formal notice with acknowledgement of receipt indicating that if you do not receive a reply, you may call on a collection professional.

Entrust your unpaid debts to a collection agency

Mastering the subtleties of the art of collecting overdue debts, collection agencies have a better chance than your employees to make rtion than your employees. than your employees.

You'll have a higher recovery rate and more time to focus on your core business.

This is a clear case for the use of a professional in the collection of unpaid debts.

Psychologically his intervention will have, unfortunately for you, more impact and resonance with the recalcitrant debtors who will who will understand that you have moved to a higher stage in your collection your collection process..

The most successful collection firms generally claim a success rate of over 80% and can assist you in your legal collection efforts by on your legal collection procedures by relying on their network of bailiffs and lawyers.

Use dedicated collection platforms

Simple, practical and economical, our online collection platform has the mission to unload your company from from the legal and administrative issues related to debt collection. Our collection platform offers a range of personalized servicess online and dematerialized.

Payment incidents should no longer be should no longer be suffered as a fatalityé. Good management of outstanding receivables and good partnerships with a professional collection and credit analysis professionals, it is possible totry à your company to remain financially healthy and and to preserve its cash flow, whichwhich alone is the engine of its growth.

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