Citi Roundtable Discusses Credit Risk and Debt Collection within the UAE Food Processing and Manufacturing Industry

DUBAI, United Arab Emirates, 1st February, 2014: The Citi Roundtable on working capital again managed to spark lively debate on regional challenges and solutions. Security and Education taking centre stage. The event held recently, at the Oberoi Hotel was attended by a representative selection of business leaders from the Food Processing and manufacturing sector. The session was chaired and moderated by UAE Credit Management expert Andy Yiacoumi, a partner with Credit Management Institute Middle East.

Many points of view were floated on the different aspects of managing the cash cycle and the perceived power of the customer and how to mitigate and protect the company cash flow. Although many used post-dated cheques there was scepticism over their security especially when figures were quoted on the number of dishonoured cheques in 2012. This being a staggering 29 million cheques in the UAE totalling close to 50 billion AED of failed "security". Some used Letters of Credit with great success offsetting the associated costs. In common with 98% of the business community in the UAE only 1 out of the group was considering insuring their debts. A position that is changing within the region as did the consensus of the group during the debates that followed.

The culture is not ready to look at new ways of financing. That was the view of many. Invoice factoring was not yet seen as a method of financing day to day operating costs as is often the norm in many parts of Europe. The attitude is still to take more costly short term loans than transfer the debt to a 3rd party. Or as was pointed out, avoid the need for loans by running a profitable business with clear payment requirements communicated to the customer.

There needs to be greater dialog and communication. This was a common theme. Not just with the customer but within the industry itself. Competitors within the industry need to sometimes work together. That way common customers can be educated.

Many points were also raised by Andy during the event; attention was given to the need for a structured policy on credit, how to assess a potential new client, manage the business cycle and also how to react when there are problems with collection. Some of the delegates had a clear process in place but many did not and were facing problems when issues arise with settlement. It was evident that the clients were in control rather than the supplier offering the credit terms. We must not forget that the suppliers are providing a free credit facility. This is something that needs to be handled and managed effectively. Clients cannot be allowed to dictate and change the agreed terms as and when it suits them.

As the market gradually improves it is important to remember the pain that many have suffered during the recession. The market is slowly maturing but there is still a great 'need to focus on education in the area of "Credit Management". It is in itself a key function within finance and having a well-trained and capable Credit Manager is vital in today's competitive market. Equally critical is having a clear "Credit Policy" so that the whole company is moving in the same direction with departments following a structured approach. Credit Management is a company responsibility. The basic concept is to run a profitable business, with all key departments involvement being clear and concise.

The event was organized by Accountant Middle East magazine.