As the Credit Crunch continues to rage globally – most recently hitting Poland and China – whose credit crunch is spooking global investors – it’s important for business owners to remember how this turbulent landscape impacts on credit controls.
With late payments continuing to be a major issue – as highlighted by a survey from global bank Citi, revealing that over half of Americans are guilty of late payments – and customers devising more absurd excuses for late payments, at the same time as suppliers demanding payments earlier, urgent action may be needed.
Do you have a process in place to deal with ‘Restricted Credit’?
If not, I’d like to share the valuable expertise of the What If? Forum – CEOs of family run businesses who call on me as their Executive Coach – who have given their insights into how they are coping with the on-going credit crunch.
Below are their tips for tackling Restricted Credit:
◾Don’t allow any customer to be more than 12 per cent of your turnover – then they won’t destroy your business if they go belly up.
◾Set up your own credit control panel and evaluate customers and their credit risk.
◾Get close to all your customers so you know what’s happening in their business and to get an early heads up if things start to go wrong.
◾With the monthly cash flow forecast, prepare two strategic plans to cope with the following scenarios:
◾What if 10% of your customers go belly up?
◾What if 10% of your suppliers reduce your credit terms?
◾Get close to your suppliers and keep them updated on your plans and successes.
◾Plan your rate of growth so you can fund it from within your own cash resources.
◾Know what your working capital requirements are for growth – the amount of net current assets you need per £100k of growth.
◾Know which of your products is throwing off cash – the revenue per product less all other business costs/cash payments associated with that product.
Do you have any top tips to share to keep money flowing through the credit crunch? Let us know through a comment below, or for further information on surviving the on-going restricted credit squeeze, e-mail firstname.lastname@example.org, follow @richardwhatif on Twitter, connect with me on LinkedIn or post on www.whatifforums.com.