The importance of having a strong and open relationship with your accounts in tough economic times is critical and it is important to pay attention to the warning signs in your business before they hit you where it hurts. Mary Repke, owner and “Chief Bag Lady” at Coakley Business Class, knows this first-hand. As a manufacturer of upscale professional women’s bags, Coakley relies on a series of distributors to get products to stores. When some of her distributors were experiencing financial hardships, Mary was quick to act. By doing so she minimized her exposure to customers closing their doors and jeopardizing her company’s future as well.
Mary has these suggestions to minimize risk with customers:
Pick up the phone and make the call. As you recognize that your orders are slowing down you need to contact your customers and find out what is going on with them so you can get a more clear picture of what the potential impact on you will be.
Try to collect on all open invoices according to terms. If your customer moves toward slow pay because they can’t make a full payment, help them out by offering to take payment on a credit card or a monthly payment plan for three months (this may give them extended terms or cost you a few points, but you have a better chance of getting paid in full than not at all).
Make sure your paperwork’s on top. Take the time to resend a billing statement with back copies of all open invoices every month. You want your paperwork on top of their papers, not buried at the bottom.
Be the squeaky wheel. Take the time to make collection calls. The squeaky wheel gets paid first.
Credit card only, please. If they have an opportunity to sell more of your product during this time, put all new orders on credit card only sales so you benefit from the sale and don’t incur additional risk.
Don’t over-ship–period. You know what is normal sales flow with your accounts so be very mindful of this during a recession. You don’t want to be over exposed. It’s better to reduce your minimums and get paid than have a big sale on your books that doesn’t get paid.
Do your own financial housekeeping. As your sales and revenues slow down, and your accounts begin to pay slowly, you need to immediately cut your expenses and be very mindful of what your fixed expense requirements are on a weekly and monthly basis.
- Like it or not, you need to generate a few extra monthly financial reports so you can stay on top of things.
- Cancel any truly unnecessary expenses or programs you have underway. Prioritize your spending by things that drive revenue.
- If you do get into trouble, it is very important to take the initiative to contact your vendors and let them know about your situation. Be very honest with them and ask them to work with you as you commit to a payment plan system to continue to send them money as you receive it until you can move back into a profitable cash flow situation.
- Keep focused on getting your business right-sized. Find other ways to generate income, especially if you are a start-up.