Within the financial management of companies, one of the most critical aspects is managing the customer portfolio. The challenge becomes even greater when dealing with a portfolio with a high delinquency rate. But what exactly are delinquent accounts, and why are they so harmful to businesses?
Delinquent Accounts
These are the set of receivables that have passed their due date and have not been paid by customers within the agreed-upon timeframe. In other words, they are debts that customers owe to the company.
Negative Impact on Cash Flow
When customers fail to make timely payments, the company lacks the financial resources to cover costs. Companies affected by a high delinquency rate may face tough decisions, such as reducing staff, delaying payments, or even taking on debt to maintain operations.
In addition to these negative consequences, a delinquent portfolio can also lead to:
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Increased Financial Costs: To compensate for the lack of liquidity, companies may be forced to seek external financing, such as loans or lines of credit, which incurs additional interest.
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Fewer Business Opportunities: Without liquidity, the company must focus on survival and misses out on opportunities for expansion, new product development, or investment in technology.
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Deterioration of Relationships with Suppliers and Partners: A company with reduced liquidity loses the trust of suppliers and employees due to delayed payments. This can result in the loss of important business partners.
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Insolvency: In the most severe cases, companies suffer significant losses, leading to job losses and a negative impact on the entire value chain.
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