Debt Provision

Almost a third (30%) of credit managers ‘guess’ their bad debt reserve requirement 

Less than one in ten (9%) are given any steer/model by their auditors 

Businesses seeking to take the guesswork out of bad debt provision at Financial Year End could benefit from a new free service being provided by Debt Register, a global payment accelerator. 

Loading a company’s five largest outstanding debts onto the automated Debt Register collections platform, with a very high chance of collecting those debts, could significantly improve the accuracy of bad debt provision. This will in turn improve the visibility and accuracy of a company’s true financial position and its bottom line, with all the inherent advantages this brings in terms of access to future lending and credit. 

The proposal follows research that suggests that almost a third (30%) of credit management professionals guess at a figure when assessing the level of bad debt reserve they require at Year End, while less than one in ten (9%) are able to look to any financial model provided by their auditors. More than a third (35%) opt for generic, age-based percentages to arrive at a figure while a quarter (26%) look to their experience of similar debt. 

Gary Brown, Founder of Debt Register, believes the survey proves what he has long thought: that the current process of providing for bad debts is invariably guesswork: “Speaking to firms and accountants, many companies have no clear picture of how collectable or otherwise certain debts are, and make provision simply by taking a best guess,” he says.  

“By passing the five oldest or longest-standing debts through our platform, however, there is a very real chance that those debts will be settled. This means the actual bad debt figure being provided for will be more accurate. because there would be no need to reserve for those invoices at all. 

“Indeed, even if the money is not collected, then that also helps takes the guesswork out of the process and gives the company and the auditor something more tangible to refer to than a vague model. Either way, Debt Register gives companies a tool that supports a more accurate financial position.” 

Real case scenarios with current Debt Register clients have already proven the point and the age of the debt appears not to be a barrier to its collectability. One customer uploaded a debt that was 888 days overdue, and the debt was settled in 27 hours. In a more remarkable example, an uploaded debt that was 1499 days overdue was paid within 45 minutes.  

Debt Register is, first and foremost, a global payment accelerator that enables a business to identify late invoices on their ledger and allow the platform to do the rest. This includes validating the customer contact’s email against a database of some 90 billion addresses to a 93% degree of accuracy. The platform contacts the debtor automatically and in the appropriate language, requesting that the payment is settled, and ensuring the invoice is correct and not in dispute.  

By leveraging its relationships with leading credit reference agencies (CRAs) to report unpaid and overdue debts, debtors are encouraged to settle any overdues promptly to avoid their credit scores being negatively impacted. In short – there is now a tangible and direct consequence for those companies should they continue not to pay an undisputed, overdue invoice. 

Along with shortening the timeframe of remittance, Debt Register provides a series of tools to credit managers including auto-translation for use within multiple territories. The system is intelligent, recognising different time zones, working days and cultural nuances including national holidays or religious festivals, and schedules the dispatch of any communications accordingly. 

To date it has successfully recovered debts in 71 different countries and six out of the seven continents  

“Using the free service means a business has nothing to lose and everything to gain,” Gary concludes, “and converts a guess into something closer to the truth.” 

Posted by Akeela Zahair