C1 Poor Management
Poor Credit Control
Credit control refers to the systems in place to manage customer payments, including agreeing credit terms on invoices and chasing payments. Ineffective management may include failing to monitor and chase outstanding debts or giving credit to high risk customers. This can lead to cash flow problems which can jeopardise the ability of the business to meet their own financial obligations.
Bad Debts
Bad debts are the money owed by a debtor that are unlikely to be paid, usually due to financial difficulties. This money gets written off as an expense which can contribute to business losses and liquidity problems.
Inefficient Procurement Systems
A procurement system is a set of procedures and processes used to make purchases from suppliers. This may include databases of suppliers, processes to have purchases approved and invoice payment authorisation. Inefficient procurement systems may result in overstocking, overpaying, using poor quality suppliers and delayed deliveries.
Weak Inventory Control
Inventory control is the process of managing and tracking a company's stock levels to ensure the right amounts, at the right quality, are available at the right time for production and sales. Excess stock (overstocking) can incur storage costs and lead to high wastage. Running out of stock (stockout) can damage customer loyalty if they can’t buy the products they desire. Good relationships with suppliers are essential for effective inventory control.
