Expert BvCM Austria provides insight: How we adapted to Corona

Thomas Bravo is a member of the board of the Bundesverband Credit Management (BvCM). As Head of Finance and Accounting at the personnel service provider I.K. Hofmann GmbH, he provides insight into how he and his department (and the industry in general) managed the Corona crisis.

Corona measures

As a matter of principle, we check the creditworthiness of all potential new customers without exception, regardless of whether or not we would later receive insurance cover. In our Credit Policy, we have defined a limit (threshold) above which we reject new business. In exceptional cases, but only after approval, we may work with a company that exceeds the threshold. We have also reduced our exceptional cases and adjusted the threshold during Corona.

With new customers, we agreed on shorter payment terms and in some cases worked with advance cash or deposit payments. With existing customers, we screened our customer portfolio and operated with intensive gestion for high-risk customers. Existing risk features were expanded to include corona-related risk features, e.g., identification and consideration of …

… risk industries – with differentiation taking place within these industries, since corona does not affect all companies within an industry to the same economic extent.
… Lack of clearance certificates.

Starting with customer meetings, we have initiated these measures, which, in the most extreme case, can result in the termination of the business relationship in the event of negative changes in the rating (the basis for this is the ratings of the insurance company and credit agency or payment stagnation). The master data in the ERP system is automatically reconciled and updated on an ongoing basis. Rating changes are immediately visible in the customer master, and our customer advisors are prompted to take action by means of a traffic light system. The technology supports us here. When we introduced our new ERP system 2 years ago, we placed a great deal of emphasis on digitizing the finance and accounting processes.

Dunning interval

Prior to the pandemic, we had a 14-day dunning interval for all dunning levels. On average, there were two dunning runs per month and a request to pay within 7 days in the dunning letter. We changed the dunning intervals in Corona times as follows:

  • Dunning level 1: 3 dunning runs per month, request for payment within 7 days.
  • Dunning level 2: 3 dunning runs per month, request for payment immediately.
  • Dunning level 3: Dunning runs weekly, request for payment immediately.

However, the change in payment requests for dunning letters has more of a technical background than a risk-based one.

We decided on the above-mentioned immediate measure relatively quickly in March 2020. However, we have since switched back to our original rhythm, as the change in reminder intervals has not shown any significant changes. There is a great deal of liquidity in the market (due to government aid packages, among other things), and we can also see this from the customer payments that are continuously received on time. This is why the shortened intervals have not had any effect. All the other measures taken, on the other hand, are having an effect. We had our last bad debt in 2019, and no more during Corona 2020 and 2021. Of course, this is due in part to the low level of insolvencies (lowest in 30 years) and not exclusively to our work.

Every employee also receives basic training in the company’s internal credit and receivables management. We have used a wide range of communication channels to raise awareness of this issue among our sales staff in particular. Especially with regard to information gathering (qualitative information).


The feared wave of bankruptcies has so far failed to materialize, but the insolvency figures are likely to rise in the next 1 to 1.5 years, as these figures are currently at a very low level. The last time we had this level in Austria was 30 years ago, so a catch-up effect cannot be ruled out. This means increasing risks for companies in the future and special attention for credit management. Digitization can, of course, provide relief here and support companies.

Industry focus: Personnel services

In general, the staffing services industry can be seen as an economic barometer because we can read future economic developments based on customer demand. On the one hand, we are often the first to record declines in sales at the start of a crisis, as our customers’ staffing needs drop abruptly, but on the other hand, we are also the first to see an improvement in the order situation when our customers quickly need more employees again with full order books. Since July 2020, we can observe that at least partially the economy is recovering, the order situation is currently quite good. If companies (regardless of sector) manage to convert this good macroeconomic momentum into economic success and sufficient liquidity, then I do not see the expiry of various government aid programs as critical – at least for most companies.

In the personnel services industry, internal financing power (e.g., conversion of trade receivables into cash) plays a very important role as a means of procuring liquid funds, since external financing options (e.g., supplier credits) are limited. In this case, bad debt losses are extremely painful and can even threaten the existence of the company (e.g. insolvency). As a service provider, we can often only invoice our services in the following month (often only when we have the hourly records of the previous month from the employee). If the payment condition is also taken into account, long periods of outstanding accounts arise even without late payment. Personnel service companies must therefore keep a close eye on their liquidity.

Classic working capital management does not work to a large extent. The financing options via suppliers are “manageable”, as personnel service companies generally have a low material and asset intensity (purchasing therefore plays a subordinate role in liquidity). The largest outflow of liquidity in terms of amount is wages/salaries and the associated taxes. Consequently, active management is not possible here either, as there are clear legal provisions (deadlines) for settlement. Credit and receivables management therefore assumes a very important operational function in our industry.

Thomas Bravo BVCM

Thomas Bravo is a board member at BvCM. 

In 2021 and 2022, we expect economic growth with a simultaneous increase in default risks.

Corona has affected companies within our industry to varying degrees. The impact is highly dependent on customer segmentation (industrial/commercial, industry, region,…). This Corona crisis again shows the importance of customer portfolio management (diversification by region, company size, industry,…). For smaller companies serving only a few customers, the possibility of diversification is of course limited, a cluster risk here can also have fatal consequences.

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