Detect shortfall of accounts receivable and payment at an early stage

Navision · Shopware · App

Recognize critical, financially weak customers long before bankruptcy or before the lights go out! Without Microsoft’s AI :-), 100% Business Central or Navision integrated, super fast.

You will also find further tips here, regardless of whether you use Business Central or Navision.

Does this require artificial intelligence? Nope.

Microsoft would like to sell its AI (Artificial Intelligence ... Either it is not artificial, like Amazon, or it is not intelligent) to Business Central & Navision in order to determine “whether an invoice is paid on time”. Or not. Wow.

That is very little for a receivables management / risk management / risk minimization against bad debts due to bankruptcies or other reasons for a default.

Continuous monitoring of receivables easy as a side task

I have something much better for you here: A real warning of customers who are about to become insolvent (going bankrupt / going bankrupt). And that is directly and easily integrated into your (almost) daily Business Central and Navision work. Easier than any receivables management, quasi "on the fly".

Of course there are exceptions and surprises, as no computer algorithm can protect you from them. But in the mass (and rule) one can observe the following:

Customers whose liquidity is falling are increasingly using their payment terms.

"Healthy" customers usually pay within the allowance period.

"Ailing customers" then switch to the due date (ie pay at the net payment target) instead of the allowance due date (earlier payment with discount deduction).

And when it gets even tighter, the due date is already a bit overdrawn ... and then a little more ... and so on.

If you wait too long, the only thing that will help you is credit default insurance ... but this insurance doesn't pay for God's wages either. 🙂

At the end of this article you will find even more warning signs of bad debt, impending bankruptcy, and payment default. You can use it even if you don't have Navision & Business Central ... But with Navision it's more elegant. 🙂

There are considerably more warning lamps (indicators) of bad debt / payment defaults (see at the bottom), but the increase in payment duration (the time until the settlement of open invoices / items) is one of the simplest and safest indicators (signs) of impending insolvency.

An increase in the order value with a simultaneous extension of the payment term is more of a confirmation of the impending insolvency than a growth indicator ... Take care to avoid payment defaults.

React in good time so as not to be left with your debts due to insolvency / insolvency of your customers. And thereby perhaps becoming a case for the insolvency administrator himself.

Navision or Business Central will help you very easily!

This technology is of course also suitable, for example, to have customers automatically adjust payment terms and credit limits by the system. Talk to me about this, if you would like to expand your receivables management / risk management in this regard.

Examples of an on-the-fly evaluation of impending bad debts / bankruptcies

What is the easiest way to protect yourself against impending insolvency / bankruptcy / bad debt of your customers with Navision or Business Central?

Quite simply: You observe the payment behavior, quite incidentally, without any additional work worth mentioning.

And that practically without adjustment in standard Navision or Business Central. Only the report (Report) 106 Customer Detailed Aging (Debtor - Due Items) has a small extension: The history of the previous payment periods / overdrafts!

We simply show the payment duration of the last n payments in the top right (or wherever you want). Examples:

Example of very healthy, punctual payer, no risk of payment default

Screenashot aus Navision / Business Central mit sicherer und vorbildlicher Zahlungsmoral

Annelise is obviously very healthy: She always pays within the discount payment period (Ø after 4 days), the current invoice is open for just 7 days. The cycle 4 4 4 4 7 4 rather indicates a bill that was paid once for a weekend 3 days later.

Ernst takes a little more time: He prefers to pay within the due date, but very reliably. And the current bill is still right in the middle of it with 14 days. Business Central or Navision gives you a reassuring message here: No need to panic.

Example: Punctual payer, little or no probability of bad debts

Screenshot von einem Kunden mit ebenfalls noch recht zuverlässiger Zahlungsmoral und kleinem Ausreißer

With one receipt and 64 days overdue (21 21 28 20 32 64 32 41 34) there was probably a lack of clarity, but otherwise no cause for concern. All others were settled (paid) after about 20-30 days. By the way, the payment days are sorted by date: The last payment (the last settlement) is on the right, so you can see the development very well.

Example fluctuating, irregular payment method

Ausschnitt aus Navision / Business Central von einem Kunden, bei dem schon Liquiditätsengpässe zu erkennen sind. Gezahlt wird offensichtlich rein nach Verfügbarkeit - So etwas sollte beobachtet werden.

It is easier to see here that this customer “pays according to availability”. Not critical, but it can easily lead to bad debts.

Although the payment terms themselves were never particularly noticeably exceeded, the jumping between yes / no cash discount clearly shows that this customer now and then has financing problems.

You don't have to worry about small amounts, but if sales suddenly rise, then your alarm bells should go off: He may want to quickly top up his stock at your expense!

By the way, if this is a known problem for you (customers quickly replenish their own warehouse at your own expense shortly before their insolvency), then we can also very easily issue the respective amounts here, which makes such a tendency much clearer Lets kick days.

But then you need a little longer to scan it quickly. Under Navision & Business Central RTC (RDLC), individual days could still be highlighted optically / in color. Unfortunately, this is not so easy to do in Navision up to version 2009R2. But also possible!

Example of creeping insolvency with a good outcome

Auswertung Debitor Fällige Posten aus Navision / Business Central mit Anzeichen für einen schwerwiegenden Luiquiditätsengpass, der sich wieder gelegt hat

It got a lot more exciting here. This customer used to pay quite well (after 18 19 20 14 8 days). Then it got a little more difficult. Corona? The payment duration went up to 82 days. Then the situation relaxed again: The payment duration clearly went down from 82 to 66, 52, 38 days to discount payment (7/8 days).

Example (almost) certainly the following shortfall of accounts receivable

Deutliche Anzeichen für eine drohende Zahlungsunfähigkeit / Insolvenz. Einfach "nebenbei" ausgewertet über die Liste 106 Debitor - Fällige Psten aus Navision / Business Central heraus

... And here we have a fine specimen of a red alarm light. At first he paid immediately (0.2), then within the discount period (8 days), then he used his net payment deadline (22 days), then he overdrawn (69 and 81 days). The current claims are now 53, 66, 81, 197 days overdue: This trend was evident a long time ago! Countermeasures should urgently be considered here, e.g. advance payment, payments on account, personal discussions with the management. Also, make sure that the retention of title is correct on all of your documents. If your Navision / Business Central is not already printing this important sentence on your documents, feel free to contact me regarding this.

And: You just do it on the side. At least I know it that the due item list (Report 106 in Business Central or Navision) is a popular tool to quickly check the open customer items shortly before the (hopefully automated?) Dunning run. And that with real intelligence, not with artificial intelligence.

And so that you can clarify this quickly with the customer, the email address and phone number are also given. Minimal adjustments to make work easier: this is how Navision works!

Automatic liquidity planning with Navision & Business Central

Much more can be generated from this data! For example, Navision can automatically determine the due dates in the customer items of Business Central and Navision from the last 3 payment cycles. In this way, your own liquidity planning - without any additional manual work - is much more precise than you can ever do it by hand. The statistics don't lie.

Further warning signals of shortfall of accounts receivable / bankruptcies

First order / new customer

First order? Maybe. even with a noticeably high value of goods, or unusual product combinations? If you don't know the customer at all, this is always associated with a certain risk.
Rating agencies such as Creditreform or Euler Hermes Rating help with a credit check. In Shopware even automatically via plug-in! Take a look at the commercial register, which can be viewed free of charge.

High priced products

Also pay attention to whether, for example, there are very high-priced products in your range that are cheaper elsewhere, or products that can be easily resold, such as cameras, laptops, notebooks ... Fraudsters do not compare prices.

Different addresses

If the delivery address in the first order differs , you should also pay attention, just as with deliveries to packing stations.

Also pay attention to the name <> mail address. A Rüdiger Müller with the email address or a should put you in alert.

Mail addresses with many digits or random combinations of letters are often created automatically (e.g. by a bot). And if the order has arrived in the deep hours of the night ... you'd better call afterwards. That can also be customer service. 🙂

Change in the punctuality of payments

In the case of existing customers, the notes on the extension of the payment term (as described above) and and fictitious complaints are an indicator. The last point is automatically expressed in the overdrawn payment lines shown above - very practical!

Previously unusual partial payments or changes to bank details are another indication that should be kept in mind.

Deterioration in customer communication, employee information

Obviously, but to be treated manually are the clear warning signs such as inaccessibility of the management, competitors who only deliver to their customers against prepayment or cash payment, name changes, relocation of business fields abroad, discount battles (just like at the "Praktiker Baumarkt")evasive responses from employees about the operating situation, employee turnover, often changing contact persons

Also make sure that your contact person drops a comment like "Since Mr. or Mrs. xxx is no longer here, nothing works here anymore" or something like that. In average companies there are usually only average employees. These companies are carried by the market.

It is more exciting with above-average companies! Often the brilliance of the company only depends on one or very few employees. A really good salesman, an excellent programmer, a super skilled buyer. In this case, the departure of a single person can jeopardize the market leadership of an entire company.

And even this process itself can be an indicator: Good employees are usually the first to leave a fluctuating company, which then increases the fluctuations.

If you hear any warning signs, a quick, free look at the commercial register won't hurt. Here you will also find, for example, the opening of insolvency proceedings. In this case, contact the insolvency administrator listed there immediately and ask about how to proceed, e.g. further deliveries to your customer.

Securing accounts receivable through factoring

There are numerous service providers who take care of your receivables management. And also offers "from 1% fee", e.g. at AXA, which quickly make you think about getting rid of this whole tiresome subject of receivables monitoring.
But please be just as smart here as your factoring provider! To do this, simply take the previous year as "Uncollectible receivables", and receivables receivables accepted as certain default. And put these in relation to their total sales. This percentage is your statistically expected bad debt loss. If that percentage is higher than the fee for your factoring service provider, you are getting good business dealings with factoring. If this percentage, however, is the same or even less than the fee for your factoring service provider, you are doing bad business selling your accounts receivable. Apart from the fact that you may also burden your customer relationship with it.

The same also applies to bad debt insurance. Of course, these companies also calculate the risk of failure and let you pay for it.

Impending insolvency as customer loyalty

Something that at first sounds like a contradiction can also be an opportunity!
Of course, this requires an enormous amount of sensitivity on the part of everyone involved. First and foremost, you need to be able to get an idea of whether a critical customer has a chance of surviving in the market. Should you come to the realization that this opportunity is definitely given, you can possibly use this opportunity to bind a very loyal, loyal customer to you for the future! Be sure: If you don't simply sacrifice your customers, refrain from “throwing them into bankruptcy” (deliberately bringing them into bankruptcy), you will win a loyal customer for the future. And here, possibly, laying the seeds for a mutually very fruitful cooperation.