Cash Collection
Why Loose Customer Payment Terms, Weak Credit Limits, and Inconsistent Collections Are Quietly Draining Cash from Your Mid-Sized Company (And the 4-Week System I Use to Fix It)
It’s March. Your team has just won a major project after weeks of careful estimation. Production delivers on time, the invoice is sent promptly. But by May, the cash still hasn’t arrived — while your suppliers expect payment in 30 days and payroll is due next week.
This scenario plays out far too often in mid-sized companies (€20M–€70M turnover). Weak credit control and inconsistent collection processes silently tie up hundreds of thousands in working capital.
The reality is that many finance teams treat overdue debtors as “normal trading” rather than a preventable cash leak. Tightening customer terms, credit limits, and collections is often the fastest way to unlock cash — without cutting costs or taking on more debt.
In this article, I share the practical 4-week system I implement in interim assignments that typically improves cash collection by 35–60% within 6–8 weeks.
35%-60%
Improves cash collection by 35–60% within 6–8 weeks
The Real Cost of Weak Credit & Collection Processes
When I start a new assignment, the symptoms are usually clear:
1
Average debtor days stuck at 50–70+ while supplier terms are only 30–45 days.
2
A few “key” customers consistently paying 30–90 days late with no consequences
3
The finance team spending hours each week manually chasing the same accounts.
4
Unnecessary use of overdraft facilities or invoice discounting.
5
Hidden profit erosion from bad debts, late payment interest, and tied-up cash.
Recent examples I’ve seen:
60 Days old
A €46M client had €14M tied up in receivables, with over 30% more than 60 days old.
Poor Collections
A €26M business was losing the equivalent of 2% of annual revenue through poor collections and write-offs.
Improved Margins
In one assignment, reducing DSO by just 10 days improved margins by 0.2% through lower interest costs.
Why Mid-Sized Companies Struggle with Credit Control
As companies grow, processes that worked when everyone knew everyone no longer suffice:
- Payment terms were set years ago when winning orders was the priority.
- Credit limits are either missing or applied inconsistently.
- Sales and project teams often resist collections, fearing damaged relationships.
- Collection activities remain reactive and manual instead of systematic.
- Finance is brought in late, usually only for reminders.
The result? Dynamic, growing companies can find themselves in cash shortages simply because they haven’t kept working capital under control.
The Hands-On 4-Week Credit & Collection System
This is the practical framework I roll out in assignments. It is firm but fair, minimises customer friction, and delivers fast results.
Week 1: Diagnostic & Foundation
Analyse the debtor ledger (aging, concentration risk, payment history), review existing terms, and establish or update credit limits using a simple scoring system. Create a clear Credit Policy document.
Week 2: Standardise Terms & Onboarding
Introduce tiered payment terms (e.g., new customers 30 days, established 45 days, strategic accounts max 60 days). Add late payment clauses to contracts and implement automated credit checks on new or high-exposure customers.
Week 3: Build a Proactive Collection Process
Set up automated reminders at key intervals. Segment customers (personal touch for high-value/good payers, firmer escalation for others). Hold a short weekly “Debtors Review” with Finance and Sales to agree on actions and escalation.
Week 4: Monitoring, Incentives & Continuous Improvement
Add debtor days and % overdue as key KPIs. Review bad debt provisions monthly and consider early payment incentives where appropriate.
Real Results from Recent Assignments
Case Study 1 – €16M Manufacturing Company
Problem: Debtor days at 68, €480k overdue >60 days, sales resistance to tighter controls.
Results after 8 weeks: Debtor days reduced to 41, €310k cash released, bad debt provision halved.
Case Study 2 – €29M Wholesale Distributor
Problem: Several large customers chronically late with no consistent process.
Results: Collection rate improved by 52% in the first quarter, releasing €265k while maintaining good customer relationships.
Time to Stop Funding Your Customers’ Cash Flow
Loose credit terms and weak collections are one of the easiest — and most overlooked — cash leaks in mid-sized businesses.
If this resonates with your company, here are two simple next steps:
Download
My free Credit Control Playbook & Template Pack (Credit Policy, chasing sequences, debtor dashboard).
Book
A no-obligation 20-minute call. I’ll review your current debtor position and share 2–3 immediate actions you can take.
