Building resilience: Embracing economic challenges as opportunities for growth
Some businesses are learning from the economic downturn, with many putting in place strategies and practices that will make them financially stronger in the long run. However, others report that the crisis has distracted them from core business activities and reduced their ability to invest.
As a result of the challenging micro economic environment, many businesses say they are reining in their expansion plans. According to the latest annual European Payment Report by Intrum, cutting costs and improving efficiency has become a strategic priority for 72 per cent of firms.
The survey of more than 10,000 businesses across Europe found that 53 per cent have shifted their focus away from growth towards cost savings, while the same number say they have been so focused on managing the economic risks to their business that they have neglected initiatives that will make them more competitive as a company.
But, while some businesses feel they have been damaged by events – 40 per cent told Intrum they were weaker today than they were 12 months earlier – others are seeing opportunities. Just under half of those questioned (49 per cent) say the measures they have taken to manage the downturn have made them stronger as a business, and 51 per cent are still focusing on growth.
"The measures we have taken to manage the downturn have made us stronger as a business than we were before the downturn"
Q7: To what extent do you agree or disagree with the following statements about inflation and interest rates?
Neither agree nor disagree
Boosting the profile of credit management
One side effect of the economic difficulties is that the work of internal credit and collections teams has come to the fore. Half the businesses surveyed (49 per cent) said cash and financial debt management has never been more of a boardroom priority than it is today.
“It’s interesting that some businesses have seen the downturn as a chance to tighten their processes and improve their credit management. Those that use this time to embed better practices will benefit in the long run.”
Robust credit policies and good lending practices are the first step in reducing the likelihood of non-payment. Sofia L., business analyst for Vodafone Portugal, points to checks and balances undertaken before accounts are agreed.
“When the commercial team has a new prospect, they insert all the data that is available for that potential customer into our system, which automatically processes a decision on whether to approve them,” she says. “Where customers are rejected, the commercial team can also ask my team to review the case manually.”
Another credit leader in Northern Europe says the downturn has brought increased focus to her team. “Our profile has completely changed,” she says. “Collection and recoveries were always something that had to be done, but the team used to be situated in the basement. Nowadays, our role is really important to our management board.”
Benefits of technology in the process
This increase in profile has the potential to drive investment in new technology to improve debt management for years to come. Two-thirds (67 per cent) of businesses said digital transformation was a strategic priority for them in 2023, despite the economic headwinds.
While there is worry about the upfront cost of investing, Emilia N., a Director of External Restructuring for Santander Bank Polska, says businesses should focus on the bigger picture. “The support of good IT solutions in collections and recovery processes is crucial – when automating easy tasks and allowing people to focus on more complex cases and give real support to customers,” she says.
“We are also using very good machine learning models. These help at every stage of the credit lifecycle, from offering customers the best products for their needs, to predicting the potential loss on our credit portfolio, to finding the best strategies during collection and recovery processes for specific groups of customers.”
Insights from the European Payment Report 2023
These insights are taken from our 2023 study. You can access the full European Payment Report, a white paper breaking down the countries' results, plus a recording of our webinar below.