How collection periods affect your credit score

Collection periods affect a company score quietly. The sale has been made, the invoice issued, the picture looks good, but the money has not arrived yet. As this gap widens, the company's position appears weaker than it actually is.

Why are late collections so decisive?

Because it affects not just one area, but two at once. Uncollected money first constrains your ability to pay: while commitments fall due on time, the funds to meet them are delayed. Then it increases your debt burden, because the cash meant to clear existing debt reaches you late.

The result is a very familiar picture: a business that looks profitable, but is constantly squeezed.

Growth makes collections harder

When turnover grows while payment terms remain the same, outstanding receivables grow as well. That is why periods of rapid growth are often hard on cash. Growth itself is not a problem; collections failing to keep pace with growth is the problem.

Ways to shorten collection periods

• Review payment terms on a customer-by-customer basis: you do not have to offer the longest terms to your largest customer.
• Follow up on overdue receivables early; the longer the delay, the lower the likelihood of collection.
• Assess the other party's ability to pay before entering into new business relationships.
• Re-evaluate your company once collections improve and see the difference.

Assessing the other party beforehand

The way to avoid a collection problem is to stop it from arising in the first place. Seeing the ability to pay of a dealer, customer or supplier before working with them spares you the chasing later. With Firmaskor, you can assess not only your own company, but also the businesses you work with.