Costs and risks of Credit Management in Italy

post-author - Tue 01 Dec 2020 - credit management , innovation

Credit Management is often considered a secondary importance activity, to which is not given the right due weight. We are often led to think that Credit Management is mainly a source of risks and costs, but if it is managed well it can be an opportunity.

Credit management brings with it risks, such as:

-          Risk of failing to collect or credit risk

-          Risk of unexpected costs for credit recovery, such as those deriving from credit collection and/or legal activity

-          Financial risk

-          Business risk

And costs, such as those related to:

-          Credit office personnel

-          Business information

-          Reminders and legal action

-          Insolvency procedure, settlement, and bankruptcy

-          Sales force involvement in credit management activities

-          Insurance coverage

These costs and risks penalize Italy.

As an example, we report a graph taken from "Studio Pagamenti" 2018, an annual event organized by Cribis, which shows how an Italian company that invoices 50 million euros has, in absolute value, the same overdue credits >30 days of a Swedish company that invoices 1.200 million euros (but probably has less resources to manage it)

 

 

According to this table you can see how overdue credits of an Italian company represent an important part of the sales volume, with respect to a Swedish company situation.

 

This happens because in Italy the judicial system is inefficient, is characterized by bureaucratic delays and by a series of weaknesses that are vulnerable to abuse by parties involved.

Unfortunately, this is an inefficiency of our country that, in many cases, can represent a "burden" which, if it is efficiently managed, can become a value for the company.