Not the best time for UK companies to take risks, but a US credit 'guru' says it is a good time for companies to take a look at radical ways to improve their margins.

Taking on greater risk of bad debt could seriously enhance your profits, according to Abe WalkingBear Sanchez - a US credit guru speaking at a seminar in Birmingham last week, hosted by global credit insurer, Atradius. With economic conditions still tough for many UK companies, and competition in all sectors becoming ever sharper, some firms are still battening down the hatches and take fewer risks. But this is a good time for companies to look at radical ways to improve their margins, argues WalkingBear.

'The trick is to learn how to control bad debt, not run scared of it,' he said.

'Without risking bad debt, however, you will miss out on the opportunity of new sales'.

'Bad debt is not always bad - it all depends on whether your product value at the time of sale is low.' Examples of products with a low value at the time of sale include: * low-cost products sold at a large mark-up.

* slow turning inventory.

* products with a short shelf-life.

* empty aeroplane seats after the doors have closed.

* empty freight trucks on the return delivery journey.

* businesses with unused capacity.

If your business has low product value at the time of sale, it could be worth considering taking on higher risk customers to make the sale.

The potential for profit outweighs the danger of loss.

'For example, imagine you have a company with sales of GBP 10 million, with unused capacity,' continued Abe WalkingBear Sanchez.

'Your fixed costs are 50%, or GBP 5 million'.

'Your variable costs - including cost of goods and sales commissions - are 45 per cent, or GBP 4.5 million'.

''It is easy to see what the impact would be on the bottom line if you could book another GBP 1 million sales.

But what if that means having to accept offers from more risky customers?

Well, even if 10 per cent of the extra sales had to be written off as bad debt, and you still incurred the 45 per cent of variable costs, if you have low product value at the point of sale in the form of unused capacity, there are no extra fixed costs.

So, the company would still have a net profit of GBP 450,000 - 45 per cent.

This is an improvement on the profit of 900 per cent.

Worth taking the extra risk?

I think so.' The seminar - 'Credit Management: From Back Office to Corner Office' - was held in central Birmingham on Tuesday 8 March'.

'It was attended by 100 UK financial directors and credit professionals'.

'Its aim was to challenge the traditional view of credit management as just another accounting function, and examine its changing role as a central business strategy, a sales support function and an effective means of boosting profitability.

'Trade debt can account for as much as 40 per cent or more of a company's assets, and British businesses spend in excess of GBP 12 billion a year on credit management,' commented David Fain, Atradius' Regional Commercial Manager.

'Yet it is often the most misunderstood, under-utilised and undervalued area of business'.

''Smarter companies, however, are starting to think about how to use credit management more effectively to boost their bottom line and increase their sales'.

'But it's not just about tightening up credit management procedures to keep the cash flowing and improve profitability'.

'It's also about turning the traditional view of credit on its head, and starting to view it as a positive, profit-driving, sales support rather than a risk-averse accounting function.' Abe WalkingBear Sanchez is well known in the United States as the founder and leading proponent of the profit-centred credit movement.

Atradius has worked with him for the past 18 months, bringing him to the UK for the first time in October 2003.

Since then he has addressed several conferences and seminars in the UK and Europe, bringing his, sometimes controversial, views on credit to new audiences.

Abe is renowned for his vision and hard-hitting style, and he brings life and energy to a critical business function whose true potential has yet to be realised by most businesses.