UK Corporates See Room for Improvement in Reducing DSOs

A survey of UK corporates suggests that reducing days sales outstanding (DSOs) is still regarded as the area of risk management operations in greatest need of improvement.

Research by credit risk software specialist Tinubu Square conducted with the Institute of Credit Management (ICM) reveal that despite major efforts made by since 2008-09 the financial crisis, 24.3% of UK companies canvassed identified reducing DSOs as the area with greatest need for improvement in their risk management operations.

The survey also found nearly two in three credit managers stated that ‘reviewing existing processes’ was one of the top two actions they were taking, or planning to take, to improve their risk management operations. In second place was ‘improving cash-flow forecasting’ at 24%.

The findings come as the ICM announced its ICM UK Credit Managers’ Index for Q413, sponsored by Tinubu Square, with a headline ‘confidence index’ figure of 58.3; a rise of 1.3 points on Q3 and showing increased confidence among credit managers in the UK’s economic recovery. This optimism is reflected by UK gross domestic product (GDP) figures which saw a corresponding 0.7% rise over the same period.

“Credit managers are continuing to make the best use of the means at their disposal to control risk exposure and maximise profitable sales,” said Mike Feldwick, head of UK and Ireland at Tinubu Square.

“Trade credit may well become more widely available in 2014, but it will still be crucial for businesses to exercise robust financial management and not to overstretch limits due to an improving market. Real-time information is an essential part of making financial management a success, you need data that reflects the real-world, in terms of your own financial position and those you trade with, to make decisions you can trust.”

In the survey, Tinubu Square posed two questions to credit managers from across the ICM, with responses as follows:

Where do you see the greatest need for improvement in your risk management operations?

  •  Reducing ‘days sales outstanding’: 24.3%
  •  Minimising your exposure to risk: 23.3%
  •  Gaining detailed intelligence on the credit worthiness of customers: 14.4%
  •  Streamlining & simplifying credit management procedures: 13.2%
  •  Connecting back office financial to front-line systems: 11.3%
  •  Having access to real-time data: 11.1%
  •  Improving your value with a credit insurer or bank: 2%

What are the top two actions your organisation has taken, or plans to take in order to make these improvements?

  •  Review existing processes: 64%
  •  Improve cash flow forecasting: 24%
  •  Invest in technology to benchmark and track performance: 20.7%
  •  Provide real time access to financial data: 20%
  •  Invest in a risk management platform: 9.2%
  •  Seek buy-in from the board: 7.6% 

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