DUN & BRADSTREET MALAYSIA

INCREASE YOUR BOTTOMLINE THROUGH PRO-ACTIVE CREDIT MANAGEMENT SYSTEM

Sound credit management is of vital importance not only in Malaysia but also worldwide.  In mid-July 1997, the wake of the financial and economic crisis in Malaysia has left many companies battered and bruised. Since the financial and economic crisis, the Bursa Malaysia has delisted 27 companies, 17 companies had been categorized as PN17, while there are still 16 companies with PN4 status that would soon be converted into PN17. 

Prior to the financial and economic crisis, Malaysia had experienced an economic growth with decades of lucrative privatization deals and booming economy that had given a growing corporate life to corporations in the country.  Simultaneously, so expansive was the trade growth in most businesses that bad debts were often treated as the general norm in everyday business dealings without significant impact on the overall turnover and revenue growth of a company.  Furthermore, a certain amount of bad debt could be written off without ill effect and bad debts were often treated as the general norm in everyday business dealings. As such, when the country was hit with the financial and economic crisis, companies were left with huge bad debts that ate into their reserves accumulated over the years.

The weaknesses in credit management that was seen surfaced among many other problems, such as misconception of credit policy or business plans, weak and slack credit process and risk management and lacking in the area of people and professionalism. In order to better enhance the understanding of credit management to achieve an effective credit control system, emphasis on pro-active communications between business units and credit departments, thorough assessment of credit process and applications based on reliable up-to-date information, pro-activity in the reviewing and monitoring of debts as well as optimization of available credit management tools, should be strongly followed.

In view of the significance of the implementation of credit management tools in achieving effective credit management policies, Dun & Bradstreet (D&B) Malaysia Sdn Bhd recently conducted a survey to examine the credit management situation of Malaysian business communities for Quarter 3, 2006. The survey is to facilitate a better understanding of credit management practices by sectors in Malaysia. It was conducted using official sources complemented with 60 companies in Malaysia randomly selected from D&B Malaysia’s database with emphasis on payment terms and pattern experienced by respondents.

On whether credit management tools are widely adopted by companies, approximately 60% of respondents are using in-house accounts receivable aging reports and other monthly reconciliation reports, which are the most basic and common tools companies generally applied in any credit management policies. The results also revealed that 25% of respondents have incorporated information from third parties such as credit reports to obtain reliable information in assisting them throughout their credit assessment processes.  Furthermore, 20% respondents have set up a department with sole purposes of independent credit management, which would allow interrelation between both business and the credit department in the aim to achieve optimization of profitable marketing of products and services and minimization of working capital through lower bad debts.

Overall, the effectiveness of a credit control system really depends on the understanding and the far-sightedness of credit management personnel on the critical level of sound credit management to businesses at large.  Weak credit management will lead to huge bad debts, and ultimately a

costly debt recovery exercise and erosion of working capital. Mr. Tan Sze Chong, Managing Director of Dun & Bradstreet (D&B) Malaysia Sdn Bhd stated, “We believe that sound credit management systems can further improve the DSO situation, reduce bad debts and capital cost, which ultimately lead to higher profits for the enterprises.”

As sound credit management is gaining importance in the country, integration in collection of credit information and management of delinquent accounts receivables with third parties such as D&B Malaysia enables the effective implementation of a pro-active credit management system to take place.Collection of credit information through D&B Malaysia’s credit reports will give businesses a better insight to monitoring and minimizing the risk of bad debts. In addition, D&B Malaysia’s RMS (Receivable Management Services) is able to facilitate bad debt recovery processes in a professional and expedient manner.

For more information on D&B Malaysia’s products and services, please visit  www.dnb.com.my

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