Sales, Marketing and Credit Risk

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25114197 - good vs bad credit score rating illustrated by a lever or switch to improve your grade in borrowing money in a loan or mortgage

Too often we see messages on LinkedIn saying such and such has not paid and “take them to small claims court”. We want to try and advise on how to minimise the risk of a non-paying / bad debt in the first instance.

First of all, who are you targeting for sales and marketing? Did you buy a list of companies to target? If so, think of how much that list cost and what it tells you.

Credit management starts before the sale is made and therefore your marketing lists should give an indication of credit risk, if not ask yourself why not? How many companies are you blindly chasing for business that are not creditworthy?

Even before you get anywhere near a sale you have paid for a marketing list that may contain companies that are not credit worthy, you may get that all elusive sale that you have been chasing but how much is this marketing list really costing you?

  • Costs of marketing list
  • Sales & Marketing activity
  • Staff costs
  • Stationery / postage
  • Phone calls

OK, it is a cost you need to accept to get the sale BUT what if you don’t get paid for that sale? All of a sudden your costs increase due to time chasing payment, debt collection costs, solicitors’ costs etc. Sure the costs can be kept down with a small claims court / money claims online.

But what if the debtor disputes your claim? You then need to put your case together; you need to attend court which takes you away from your day to day duties.

Or you may not have identified the legal entity you are trading with and issue against the wrong one, that means stopping the claim, starting again and risking paying the other sides costs!

Of course the debtor may not defend the claim and you can apply for judgment / decree in default, that is more costs, then you instruct the sheriff’s’ officers to collect your money, more costs. The sheriff’s then reports back that the debtor has no assets to enforce against so it has all been good money after bad.

So what are the real costs of that marketing list?

  • Costs of list
  • Sales & Marketing Activity
  • Staff costs
  • Stationery / postage
  • Phone calls
  • Time away from the business
  • Turning down further work as too busy trying to collect the debt
  • Collection costs
  • Court costs
  • Sheriff’s officers costs
  • Bad debt

Of course you may be lucky and the sale you pick up turns out to be a good one, paid on time and profitable.

The question is do you want to leave it to luck or do you want to reduce the risk before even spending money on a marketing list?

I would like this blog to be more about making you think rather than “Another sales pitch” but at the same time we want to help you reduce the risk.

We can provide a marketing list which has the companies in the sector you want to target and crucially we filter out those with court judgments / decree, poor credit score etc. Of course if you want to target those with a low credit score we can include them. In other words, tell us what level of risk you are comfortable with and the sector and we will do the rest.

Our next blog will look at credit risk assessment in more detail.

 

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