21 Jun 2022 - Uncategorized
Post pandemic and geopolitical crisis:
THE OPPORTUNITY OF AN AUDIT FOR EFFECTIVE MANAGEMENT
OF THE CREDIT PROCESS
When faced with a loss, have you ever wondered if it was avoidable?
You noticed in time or rather too late that the debtor was not solvenible?
Have you taken care of or are concerned about reviewing the credit granting processes, on a periodic basis?
We intend to provide optimal answers and solutions to these and other critical issues in credit management with a view to improving the credit process which is always possible and above all desirable..
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Starting from the statistical data, according to which over 70% of default of companies, derives from imprudent and unprofessional management of the unpaid debts of its customer portfolio and from the objective circumstance that a significant quantity of unpaid debts incontrovertibly and negatively affects the company's ability to generate and increase its cash flow, the need arises, in a market where the “credit factor” it also constitutes a competitiveness tool, to equip oneself with a correct credit process which represents an important factor, indeed essential, to ensure business continuity and thus avoid unpleasant surprises.
In other words, prevention is better than cure.
The above is so important that the New Code of Business Crisis and Insolvency provides and regulates alert procedures in the awareness that the possibility of safeguarding the values of a company in difficulty (c.d. “viable but distressed”) are directly proportional to the timeliness of the remedial intervention. On the contrary, the delay in perceiving the signs of crisis causes that, in most cases, degenerate into real irreversible insolvency.
When the company relies on a provider, internal or external, for managing the business (judicial and extrajudicial) of your credit collections, then we need to ask ourselves what went wrong in the prevention and management of risks inherent to trade credit.
In other words, it is necessary to verify whether the management of one's commercial credit has taken place in a professional manner or not, i.e. whether it is careless or instead attentive and diligent., in the knowledge that, always, the management of this corporate aspect can always be improved.
Given these premises it becomes fundamental, for an economic entity, check yours performances, through audit activities, this in the end, to provide an effective and reliable tool to support the organization or the client company that, in such a way, will be able to act by improving their performance, its cash flow as part of a more careful and diligent credit process and, in a word, more professional.
The audit consists of the systematic verification and analysis of credit management processes and aims to make them high-performance with a view to continuous improvement in compliance with the provisions of the UNI/PdR/44 practice.
UNI/PdR 44 practice:2018 is a document published by UNI (Italian Standardization Body), a fine 2018, with the purpose to prevent and manage the risks inherent to commercial credit, certifying its processes in such a way that they are recognized and validated by an impartial third party that guarantees their compliance.
The final objective is to provide clarity of the credit management process to all stakeholders interested companies.
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Ultimately, competition between companies is exercised not only at the time of sales and therefore in the management of their own core business, but also at the time of debt collection.
It is important to carefully monitor existing credit customers and ensure payment within the established timeframes by having a Credit Policy, resorting in cases where it was then necessary for the judicial recovery activity (or out of court) of their outstanding debts.
It is necessary for a company to acquire the procedures to manage optimally, its own commercial credit process from its inception or from its "physiological" phase up to that, possible, “pathological” related to forced recovery.
Lastly, and certainly not in order of importance, it should be noted that the art. 2086 paragraph II civil code as amended by‘art. 375, comma 2, d.lgs. January 12, 2019, n. 14 – entered into force pursuant to art. 389 comma 2 d. lgs. n. 14, on March 16, 2019 – establishes that: “The entrepreneur, that operates in a corporate or collective form, has the duty to establish an organizational structure, administrative and accounting system appropriate to the nature and size of the company, also based on the timely detection of the company's crisis and the loss of business continuity, as well as to act without delay for the adoption and implementation of one of the tools provided for by the law for overcoming the crisis and recovering business continuity”.
Making use of a process of certification of the credit process and therefore of credit management through the UNI DPR 44/2018 practice constitutes an opportunity for the entrepreneur to be able to comply with the obligation to equip himself with an adequate "organizational" structure., administrative and accounting" functional to the "timely detection of the company's crisis and the loss of business continuity" also in order to avoid incurring civil and other liabilities.
Lawyer. Filippo Lipiani
(Auditor Credit Management)